Strong start to 2019

For the month as a whole, the US S&P 500 Index rose 9 per cent measured in USD, while the European Stoxx 600 Index increased by 6.8 per cent measured in EUR and the Nordic VINX Index finished 3 per cent up measured in NOK. Here in Norway, the Oslo Stock Exchange (OSEBX) climbed 4.5 per cent. 

Sees a pause in interest-rate hikes

The fear of a recession in the USA gradually disappeared in January and at the same time the uncertainty regarding a "shutdown" of the public sector was temporarily removed. On top of it all, the US central bank (Fed) signalled a slowdown in the rate of interest hikes and that it would wait and see what the economic developments were like following the market unrest. Most economists believe a pause in interest-rate hikes will last until the second half of the year, while the market believes the central bank is finished. The tone regarding the balance sheet policy was also interpreted as being more flexible. Similar signals were also sent out by the European Central Bank. In total more than enough to send the stock market sharply up. 

Lower macro figures 

Although the recession scenario is being priced out of the financial markets, global macro figures are on the whole continuing to fall. The consensus GDP growth expectations for 2019 are also being further reduced and here developments in the USA during the past two months are especially making a negative contribution. The trend is probably further strengthened by the prospects of lower energy prices. Despite late-cycle wage growth in many places, it thus does not look as if fears of inflation will increase any time soon. 

Faith in a solution to the trade war 

Developments in the trade war are another factor contributing to the increasing appetite for risk. Although the signals from the various rounds of negotiations have at times been mixed, most are positive. The rivalry between these two major powers – the USA and China – is hardly likely to end at the negotiation deadline in March. However, there is reasonable hope that the escalation of tariff rates between these countries will come to an end. If so, this will be a win-win situation for both parties. 

The road ahead … 

The stock markets are continuing on their volatile journey. For investors who threw in their cards during the turbulence in December, January was an expensive reminder that the long-term excess return in the stock markets is best achieved by shutting out the noise – and being exactly that, long-term. 

"There's no time, place, or purpose of a government shutdown or default" 
Cory Gardner