Right in the middle of summer, it's time – next week, the reporting season for listed companies is getting underway. Danske Bank's senior strategist Maria Landeborn points out what can trigger a stock market rally.
Those who have dozed off in the hammock should wake up now, at least until Friday. Then, the reporting season gets underway with heavyweight Ericsson, and after that, it's going to be a wild ride.
The company reports for the second quarter are concentrated to a few days, and during the ten trading days (15-26 July), nearly 9 out of 10 companies on the Stockholm Stock Exchange will release their interim reports.
It's going to get really intense on July 18, when industrial giants like Atlas Copco, SKF, and Trelleborg are crowding out automotive companies like Volvo Cars and last but not least, Telia.
How dramatic can it get? Not very, according to Maria Landeborn.
We've had a good first half of the year economically, and there's nothing indicating that companies will encounter headwinds during the second quarter. I don't see any major reason for concern, she says.
No Profit Warnings
One underlying factor that Maria Landeborn highlights is the fact that analysts' estimates haven't been revised downward recently, which can be seen as a positive sign. Moreover, profit warnings have been absent this time around.
The Stockholm Stock Exchange has risen by around 9 percent this year. A strong upswing ahead, however, will not be determined by the reporting season, but rather by other factors, according to Maria Landeborn.
There will be a lot of focus on the US and what's happening with inflation, and when will the Fed lower interest rates? If they lower rates due to lower inflation, it could trigger a stock market rally, but if they lower rates due to concerns about the labor market and the economy – then it won't lift the stock market.
Carries Heavy Weight
For the Stockholm Stock Exchange, where the industrial and banking sectors carry heavy weight, the focus will naturally be on these companies in the coming weeks.
Partly, the cyclical companies carry heavy weight on the stock exchange, partly, they say something about the economy, so they also become an indicator. Order intake, profitability, is it being maintained, but also all forward-looking comments, mentions Maria Landeborn as factors to keep an eye on.
When it comes to the banking sector, the banks have found themselves in a slightly different situation now that the first interest rate cut from the Swedish Central Bank has taken effect, and they have opened up for another 2-3 cuts during the second half of the year.
This will have consequences for the banks' earnings – but on the other hand, there are other factors that can benefit them, says Maria Landeborn:
In the positive wave, activity has improved on the mortgage market, and a stable economy likely means low credit losses for the banks.
