Economic tailwind for shares

"With a nice upward curve in the bonds market, a nominal (in other words, including inflation) BNP growth of 4.1 percent and a strong growth in the leading indicators from both the OECD and the Conference Board, it comes as no surprise that the US stock market is reaching new heights almost on a weekly basis," writes Chief Strategist at Sparinvest, David Bakkegaard Karsbøl, in his latest monthly comment for November.

If one look at the Eurozone, the picture is more or less the same in the near future, and as David Bakkegaard Karsbøl have described previously in the monthly report, it is his continued impression that the Eurozone is in a cyclical sense a couple of years behind the USA. Unemployment in the Eurozone is still falling systematically but due to the southern European countries it remains relatively high at 8.9 percent.
The coming months will herald strong growth in both the USA and the Eurozone. However, our models indicate that US growth in particular will be significantly weakened after the new year. This applies regardless of whether we look at the models for orders for consumer goods, general demand or industrial production.
This conclusion is further supported by the model for leading indicators in the USA. However, it is still too early to expect anything other than a temporary downturn in growth rates. There is no discussion of a recession in the next 12 months. The Eurozone looks slightly healthier. The leading indicators will also fall over the next 12 months, but not to the same degree.
Thus, there is continued macroeconomic support for risk-heavy asset classes – including shares, which are also experiencing solid earnings growth.   


Read the Monthly economic report here