Stock markets plummet after notice of rent increase in the US – NRK Norway – Overview of news from different parts of the country
On Thursday afternoon, the so-called main index on the Oslo Stock Exchange closed down around 1.4 percent. It happens after the US Federal Reserve on Wednesday night is published and referenced from its meeting in December.
The minutes show, among other things, that the central bank, often called the Fed, is concerned about the high inflation in the country.
In December, the Fed announced that it intends to raise the key policy rate three times in 2022. Today, the interest rate is in the range of 0-0.25 per cent.
The bank also states that it will reduce so-called support purchases of liabilities twice as quickly as previously announced. This is because the US economy is considered to be improving.
Looking to secure companies
NRK wrote in December that Norwegian households have doubled their share savings since the pandemic hit, with zero interest rates that have served as fuel for a sky-high stock market.
One of those investing in the stock market is Hans-Jørgen Wagelid (22) from Sandvika in Bærum. Wagelid is studying economics and administration at BI Norwegian School of Management in Trondheim, where he is also a member of the finance group Bull Invest.
For Hans-Jørgen, the broad stock market fall came as a result of the message from the Fed that awaited.
– Yes, in relation to what we saw yesterday, I would say that it was. One could at least expect it on the Oslo Stock Exchange, since it is a stock exchange that controls much of the market around it.
Believe in more turbulence
He is no longer worried about the development on the stock exchange, but personally believes that it may be wise to invest in companies with secure earnings today, rather than more uncertain alternatives.
– I imagine that many companies that have been popular among us small savers will probably be affected more than we are used to. We are used to the fact that it has gone up a lot, but now it may be wise to look at safer ports and companies that make money and have something to show for it on paper.
At the same time, Hans-Jørgen believes in more turbulence in the future, and has that in mind when he invests his money in the future.
– I am thinking of investing in secure companies that have earnings today. Growing companies prices in relation to what they will earn in the future, and this will be affected by rents that are today. When the US Federal Reserve announces that they will increase faster than first expected, it will be affected.
– Oslo Børs is an attractive place to be
In addition to the Oslo Stock Exchange, the three main US stock exchanges, as well as stock exchanges across Europe, have also reacted with a broad decline following the message from the US Federal Reserve.
The US stock markets fell sharply yesterday, and will continue to fall further on Thursday afternoon Norwegian time.
Nordea’s chief strategist, Erik Bruce, believes that the market is worried that it will flow into the stimulating monetary policy that it currently has.
– The higher the rent, the weaker will grow. Interest rates have been very low, so saving in shares has been very favorable. When interest rates rise, it is conceivable that it will be more favorable to save in a bank and rather put the money in rental securities than shares.
Despite declining stock prices worldwide, oil prices have remained relatively stable. A barrel of North Sea oil today handles for around a little over 80 dollars a barrel.
Bruce points to the stable oil price as a positive sign for the development on the Oslo Stock Exchange.
– It is positive for the Oslo Stock Exchange that the oil price remains and was not affected by the unrest. So the Oslo Stock Exchange is an attractive place to be.
– So there is no need to panic?
– No, I would not be at least. There is always greater uncertainty about having money in shares, and it fluctuates much more than having bank deposits, so one must always take into account that there may be larger fluctuations, but in the short term I think the stock market will give a good return in year.
At the same time, he advises small savers to invest their own money.
– Now I do not think that oil prices will go up that much more, so I think it is still wise to invest in many different areas and not only the Oslo Stock Exchange, but also a broad international exposure in its shares.
Predict major fluctuations
DNB Markets’ Senior Economist, Kjersti Haugland, also points to the alarmingly high inflation in the US as the reason for the nervousness in the market.
– It is an expression that the market players are now nervous that we may have a more abrupt tightening of politics than one imagined in advance, she says.
Haugland points in particular to shares that are valued based on the money that will earn in the future as extra vulnerable to rent increases.
– It is especially technology shares, shares that are based on earnings far in the future that are vulnerable to a rent increase. Hers has unusually low interest rates pushed up the prices of these shares for a long time, and now the fear is that you will get a terrible reversal here when the rent increase becomes strong, Haugland explains.
She tracks larger fluctuations in the market now that higher inflation is on the way.
– Yes, now is the time for tightening both money and fiscal policy, after some dramatic years associated with the coronavirus. The policy response, which has been exceptional, must be reversed, and guarantees an unstable development in the financial markets that has become accustomed to strong stimuli.