Positive November Performance
In November, global stock markets rose by a solid 7%, marking a 26% increase compared to November last year. American stocks rose by more than 10% in November, partly due to a strengthened dollar, while Danish, Nordic stocks, and emerging markets saw declines. Some of the biggest gainers were small-cap stocks and bank stocks.
There has been a significant disparity between the top and bottom performers on the stock markets this year, with a few large American tech stocks bearing the heaviest burden. As a result, many investors have not received market returns this year. Since November last year, American stocks have dropped by 35%, while Danish stocks have only dropped 3%. This marks a historic lag and the second consecutive year in which Danish stocks have trailed after years of solid performance.
A period of rising interest rates was interrupted in November by rate cuts in Europe and Denmark, which provided good returns on Danish bonds, especially long-term bonds with returns of around 2.5%. Stable interest rate spreads and falling rates also provided gains on credit bonds in the last month. In total, bonds have yielded between 2% and 6% since November last year, which is quite good.
Why? Relief After the US Election, Confidence in American Resilience
The returns in November were primarily driven by solid macroeconomic data from the US and a clear election victory for Donald Trump. This allowed the prolonged election uncertainty that many feared to be avoided. The positive performance of stocks and Bitcoin is expected to stem from lower business taxes and favorable regulation of the business sector and cryptocurrencies in 2025 after Trump assumes office.
Weaker growth figures and political turmoil in the EU led to interest rate cuts in Europe and a weakening of the euro. Fears about the consequences of Trump’s trade policies in the coming period also caused stock markets outside the US to weaken.
It appears that the Trump election victory and turmoil in Europe have accelerated the search for American stocks and confidence in American resilience—believing that the US economy and stocks are stronger than the rest of the world. The counter-argument to this is that if Trump pursues aggressive trade policies, the EU and China will not sit idly by but will instead respond by targeting the US in ways that could affect the stock markets.
Everyone is Waiting for Trump on January 20, 2025
Everyone is eagerly awaiting to see what kind of policies Trump will implement when he resumes office on January 20, 2025. Most experts seem to agree that nothing is certain, as Trump is known for saying things that can go in many directions.
Currently, there are discussions about both a positive and a negative scenario for the period after January 20:
Positive Scenario
- Stronger growth and profits due to lower taxes in the US, reduced inflationary pressure due to increased US oil production, a trade deal with China, and a solution for Ukraine.
Negative Scenario
- Rising interest rates, higher inflation, and international housing markets, especially the US market, and consumption, which is more sensitive to interest rates, are under pressure. Global trade could weaken as US trade partners retaliate.
A widespread trade war with high tariffs on products from China and the EU is expected to lead to higher inflation and slower growth in the US. Inflation could rise by 2 percentage points, and growth will be delayed, leading to an economic slowdown. Many investors believe Trump’s policies could limit growth. The rising cost of living could also lead to voter dissatisfaction, and China may respond harshly.
On the other hand, there is strong bipartisan opposition to China in the US, and with the appointment of China critic Peter Navarro to Trump’s team, there is an expectation of a tougher stance towards China.