Fear priced in has Norway’s biggest bank going long on stocks

The allocation managers at Norway’s largest bank are betting the worst has been priced into the global markets.

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“A lot of fear is priced in,” said Torje Gundersen, head of allocation and selection at DNB ASA, in an interview last week. “If the fear doesn’t materialize, it’s correct to be positive to stocks.” Global stock markets have rebounded in June. The MSCI ACWI Index is up 13 percent so far this year.

Gundersen’s team, which manages about NOK 40bn (USD 4.6bn), is overweight stocks, high yield and Norwegian investment grade bonds while it’s underweight global investment grade bonds and Norwegian money markets.

"Our most important argument for that is liquidity,” he said. “The monetary policy is more expansive now than 5 to 6 months ago. That’s normally positive for the market.” Gundersen doesn’t see a full scale trade war between the U.S. and China as Donald Trump wants to be re-elected.

“In the end we think the rational arguments will win,” he said. “It’s just a very ugly way of negotiating. There will probably be an agreement in the end because both countries have too much to lose.”

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