Stock Market Growth Does Not Reach the Nordic Countries and Denmark – Interest Rates Remain Stable
The growth in stocks that began in mid-April continued last month, and a strengthened US dollar further boosted returns, resulting in a total return of 4.0% on global equities in July. This also means that the year-to-date return on global stocks has just edged into positive territory. Cyclical or economically sensitive stocks saw the largest gains, while defensive stocks did not rise much.
Once again, stock market growth did not reach Nordic and Danish equities, which in July had returns of -4.9% and -2.4%, respectively. A notable drop in shares of Novo Nordisk had a particular impact. From the beginning of the year to the end of July, Danish and Nordic equities have declined by about 4%.
Interest rates continued to fluctuate up and down in July, and the return on Danish government bonds was close to zero as a result. There was renewed interest in high-yield and riskier corporate bonds – over the past year, these have returned between 0.6–1.1% and 2.4–5.5%.
After several months of decline, the US dollar strengthened in July, which contributed to halting the growth in several commodities such as gold.
Why? Strong Earnings Reports and Optimism About Growth and Inflation
The strong returns are primarily due to investors around the world now believing that the global economy will experience a “soft landing” in the second half of 2025 – the so-called “Goldilocks” scenario. This refers to a situation where both growth and inflation are moderately low, so inflation and interest rates remain stable while growth is still strong enough for companies to increase their profits.
At present, most investors do not believe that Trump’s trade policies will significantly increase inflation in the US. The coming months will show whether this optimism holds. Strong earnings results in the second quarter – especially among American companies and particularly the large tech firms – have also contributed, although the US Federal Reserve’s decision not to cut interest rates had the opposite effect.
However, profit growth in several sectors has been quite low, which may indicate some growth challenges – both globally and in the US. Lower-than-expected inflation figures, on the other hand, have led many to expect that the US Federal Reserve (Fed) will cut interest rates next year, which has further boosted optimism in the stock market.
Conclusion, as long as investors continue to believe in a softer global economic outlook, the trend remains positive for both equities and bonds. However, rising inflation or lower growth could impact the current positive trend.