According to a Finnish analyst, earnings may not be received if the shares are sold too early for certainty. That’s why it’s worth keeping your temper now, even if there’s nervousness in the market.
The United States Last week was the weakest week after the collapse caused by the corona epidemic, and stock prices on the Helsinki Stock Exchange also fell on average.
Investors would be interested to know before the beginning of next week whether the market downturn continues and what should be done.
Concerns are compounded by the fact that diverse oracles are now making their predictions about course developments as they always do with growing nervousness.
For example a well-known British investor Jeremy Grantham said last week he saw “the fourth superbubble of the century is already here”. He blows tens of percent downturns in key U.S. stock indices.
Read more: The bursting of the stock exchange’s “super bubble” has already begun, says the investment boss who predicted previous market bubbles
HS interviewed Finnish analysts on Friday, whose views were much more moderate.
OP’s chief analyst Antti Saari said the stock market has a rather “taste of excessive panic”.
“The market likes enthusiasm in both directions,” Saari said.
Danske Bank’s senior strategy Kaisa Kivipelto in turn, stressed that downturns and repairs are part of stock market developments.
The stock market movements should be related to the upswing before the decline. While the decline in recent weeks, particularly in U.S. stock market indices, looks sharp, the Nasdaq index, for example, was still 43 percent higher at the end of Friday than before the collapse of the corona epidemic less than two years ago.
The pandemic had already been preceded by a very long period of rising prices. Before the financial crisis in 2008, the Nasdaq index was 2,725 and on Friday it was 13,768.
Thus, during the pandemic, stock prices have risen really fast as drastic stimulus measures on both sides of the Atlantic have pushed down interest rates and further increased the amount of money in circulation.
Yields on low-risk investments, such as bonds, have been so poor, even negative, that capital has flowed into higher-risk investments, such as equities.
Now the major direction of monetary policy has reversed. Inflation is faster than in decades and although some of the acceleration is likely to be temporary, central banks are expected to tighten monetary policy gradually.
It means downsizing securities purchase programs and rising interest rates. These actions are likely to transfer capital from stocks to the fixed income market shortly, which may be reflected in stock prices.
However, the tightening of monetary policy is slow. In Europe in particular, the ECB is vigilant against disrupting the financing or economic growth of euro area countries. In the wake of the pandemic, public finances in many eurozone countries are even worse, and rising interest rates could have a devastating effect.
Inflation also poses direct challenges for companies. It is worthwhile for the investor to monitor whether companies have been able to pass on the increase in the price of their inputs to the prices of their own products.
Danske According to Bank’s Kivipello, the investor guru is well suited to the situation Warren Buffettin quote: “Only when the low tide comes will we see who swam naked.”
In a declining market, companies whose stock valuations are based on unrealistic and uncertain expectations could suffer severely.
Instead, steadily growing companies with good cash flow are still doing well. As long as the business is doing well and the expected cash flows are commensurate with the share price, there is no reason why the value of the share should decline.
Grain is now being separated from chaff as investors, raised by a cold shower, humbly return to corporate income statements and balance sheets.
Analysts believe that the beginning of the earnings period explains the fluctuations in shares. Netflix, for example, was disappointing. The reaction from investors was fierce.
Comments from many other companies about future expectations have been cautious and are now listened to with a really sensitive ear.
Read more: The number of Netflix’s new subscribers fell slightly short of the forecast – the stock collapsed on the secondary stock exchange
On the other hand, no huge collapse is believed. It would also require an expectation of a collapse in general economic development and hence demand.
According to Kivipello, Danske Bank has already reduced the weighting of shares in its recommendations. Instead of overweighting stocks, the recommendation is now neutral.
“If we believed in some kind of stock market crash, we would recommend underweighting the shares,” Kivipelto says.
Shin and Kivipelto also emphasize the importance of long-term investment in equities.
“Every investor should rather focus on building their own portfolio to withstand the ups and downs of the market. There is a real risk of losing revenue if you sell too early. It is worth remembering why the stock picker has chosen those shares for his portfolio, ”Kivipelto said on Friday.
“If the portfolio is full of expensive growth companies, I would start to lighten it and buy more moderately valued companies,” OP’s Saari said.
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