Nordea’s chief strategist Antti Saari believes that the strong growth rate of the global economy is now at hand.
Investors the biggest amazement is now in the fixed income market.
U.S. government bond yields have plummeted significantly over the summer. The rate on U.S. 10-year debt stood at 1.2 percent on Tuesday, its lowest level since February. The interest rate peaked in March at around 1.8 per cent.
The fall in interest rates has aroused astonishment, especially as U.S. inflation figures have been higher than expected during the spring and summer. Even the governor of the US Federal Reserve Jerome Powell said it was recently surprised by the rate of inflation in recent months.
Rising inflation often leads to rising interest rates, but now the relationship between interest rates and inflation seems to have turned upside down.
“Few investors believe that long-term US interest rates would now be at a reasonable level. With these growth and inflation expectations, it is likely to hurt towards 2% towards the end of the year, ”Nordea’s main strategy Antti Saari says.
S-Bank’s strategist Lippo Suominen believes that the decline in interest rates in recent months may be the result of herd behavior by investors.
“Virtually all major investors expected interest rates to rise in the spring. As everyone expected rising interest rates, there were no more sellers in the market and interest rates began to fall. ”
Also the stock market has seen small symptoms of the summer flu.
The stock market has plummeted in recent days around the world. The S&P 500 index, which tracks the stock prices of the largest companies in the United States, fell 1.6 percent yesterday. Europe’s key stock indices fell more than 2 percent on Monday. The mood seemed to calm down on Tuesday morning and the stock market was moderately rising.
The stock market slump of recent days is still quite moderate. The most monitored stock indices are still higher than two months ago.
“The very growth phase of the global economy now seems to be at hand. The stock market is considering the period and pace at which growth will level off, ”says Saari.
S-Bank’s Suominen is on the same lines.
“The movement in the stock market in recent days seems pretty normal. The courses have hurt so much that expectations for the future have been very optimistic. It’s only natural that some oxygen is sometimes drawn on the market. ”
Strategists agree that the corona news of recent weeks is not the main reason for market nervousness and interest rate depression. According to them, the near-term economic outlook has not changed significantly, although the delta variant of the coronavirus is spreading rapidly in Europe.
“Recently, no new information has been received about the corona situation that would have a significant impact on the world’s economic growth prospects,” says Saari.