After the stock market rally in 2013: Are stocks too expensive now?
2013 ended as a good year for stocks in the western stock markets. But what about stock price valuations now? Danske Invest's chief analyst gives his opinion here.
Stock markets in both Europe and the USA have rallied throughout 2013 where US stocks among others increased by more than 29%. But have stocks now become too expensive and are investors to experience a hangover after the party? The short answer is 'no'.
The easy monetary policies have brought about record-low yields, and this can motivate investors to seek towards more risk to obtain higher returns. Stocks may therefore increase to an extent 
where they in 2-3 years will be expensively priced. However, there are also other factors that come into play, and there is at the same time a great variation in the potential going forward depending on in which direction of the world you look. Danske Invest's chief analyst Bo Bejstrup Christensen gives his assessment of the return potential in 2014 of both European and US stocks as well as of emerging markets stocks.
US stocks:
Throughout the past year US stocks have rallied. Chief analyst in Danske Invest Bo Bejstrup is nevertheless of the opinion that the stocks on the other side of the Atlantic have not become too expensive.
"In our view the current valuation of US stocks can be justified by the positive macroeconomic development in the USA and by the low yield level. The fact is that there is a strong presumption that US stocks will show additional increases next year. For the full year 2014 we expect to see returns in the order of 8-10%," says Danske Invest's chief analyst Bo Bejstrup.
European stocks:
European stock markets also increased significantly in 2013, and Bo Bejstrup Christensen's view in respect of these stocks is also that they have not become too expensive. The incipient upswing in Europe will entail solid opportunities for corporate Europe in 2014.
We believe that the return on European stocks may turn out to be slightly higher than that on US stocks. This is so because the valuation of European stocks are generally lower, and corporate earnings may increase relatively strongly at the beginning of an upswing even if growth is at a moderate level. One reason is that there is plenty of idle capacity which is ready to be exploited," states Bo Bejstrup.
Emerging markets stocks
The development may go either up or down in 2014. This is Bo Bejstrup's expectation for emerging markets stocks.
"Within recent years, emerging markets have seen a poor development relative to that in the western economies. Growth has not met expectations, and more of the large developing economies have struggled with balance of payments deficits. The expectations going forward are now lower, and if the countries will take a sound approach to correct the imbalances, there will be paved a way for larger returns. However, the risk remains that growth will continue to disappoint or that the economic adjustments will be so costly that emerging markets will continue to lag behind next year, says Bo Bejstrup.
You can see a video with Bo Bejstrup Christensen where he gives his view on 2014 here.
