Hilde Jenssen, Head of Fundamental Equities at Nordea Asset Management takes a look at the road ahead As we wrap a very dynamic year for capital markets, Hilde Jenssen, Head of Fundamental Equities at Nordea Asset Management, answers three key questions about what we can expect in 2024.

What key themes will drive equity market performance in 2024 and where areas can investors find opportunity?

I believe the two megatrends for the next decade and beyond are Climate transition and Digitalization. Both present significant investment risks and opportunities for the private and public sectors and forge new alliances across sectors and geographies. Companies that are positioned at the intersection are particularly interesting, specifically those providing resource efficient solutions production and services. Equity investors will be able to invest in companies that boost productivity at the growth end of the investment spectrum. At the same time, they can participate in value opportunities, as materials will be needed for infrastructure buildout.

What are the main risks and challenges equity investors may face in 2024?

There is still a big question mark around the future of China, and not the least the Chinese consumer. Additionally, recession risk still looms in US and Europe, albeit less now than at the beginning of the year. Stubborn high inflation and increasing interest rates have weighed heavily on equity valuations. However, inflation is now abating, which should be supportive for stocks. Finally, the recent hype around a few select mega cap technology stocks in the US has caused a valuation gap between expensive large cap stocks and beaten down small and mid-cap stocks of historical proportion. Like any trend and emerging technology, there will be winners and losers, this will be also be true in 2024. As a result, we try to stay selective in our stock picking and focus on a solid fundamental analysis, including ESG and valuation work to understand the risk-reward spectrum before investing.

As the geopolitical situation seems to be more fragile than ever, how can investors brace for further disruptions to come?

As I am writing this, war has broken out between Hamas and Israel, which reminds us of the fragility of world stability. As long term investors, we believe fundamental company results will drive performance, although short term there can be deviations away from our view of fair company value. We try to find good businesses with solid cash flows and balance sheets that are able to withstand short term volatile conditions.