Nordea Private Banking Investment Review

Positive returns in January

Equity performance was broadly positive across regions and sectors, although return differentials were significant. Emerging markets rose the most, posting a gain of 9.0 per cent, while Japan strengthened further with returns of just over five per cent. Among sectors, materials delivered double digit gains, benefiting from signs of improving economic momentum, and the energy sector also fared well despite relatively subdued oil prices. The technology sector returned roughly one per cent in January, though its relative appeal softened as investors sought opportunities among more moderately valued cyclical companies.

The year also began on a positive note for the Helsinki Stock Exchange, which advanced nearly three per cent. This was driven by rising valuation multiples, high dividend expectations and the spillover effects of technology related investments on industrial and growth companies. International equity valuations, however, have climbed notably. The price to earnings ratio based on earnings estimates now stands at around 19, leaving limited room for disappointment. Among Nordea’s funds, Global Dividend offers exposure to companies trading at more moderate valuation levels.

A stable economic outlook

January’s macroeconomic backdrop continued to support a relatively steady investment environment. The International Monetary Fund raised its forecast for global GDP growth in 2026 to 3.3 per cent. This revision reflects, in particular, the strengthening wave of AI related investment and the global economy’s gradual adjustment to the higher US tariff levels introduced earlier. Inflation is expected to develop moderately, supporting consumer purchasing power and reducing the risk of near term monetary tightening. The IMF nonetheless notes that valuation levels have risen sharply following the technology driven rally, increasing the risk of overheating in financial markets.

Economic performance in the United States remained strong in the latter half of last year. GDP expanded at an annualised rate of 4.4 per cent in the third quarter, and the Atlanta Fed’s GDPNow model forecasts growth of more than five per cent for the final quarter. The expansion is underpinned by resilient private consumption, the momentum of AI related investment and improving export demand.

Growth in the euro area is also expected to pick up this year, although the pace recorded at the end of last year did not match that of the United States. The euro area economy is estimated to have grown by just over one per cent year on year in the final quarter.

Robust earnings growth in the United States

The fourth quarter earnings season in the US has begun on a positive note. Profits for companies in the S&P 500 are expected to rise by about 11 per cent from a year earlier, lending further support to equity markets. Technology giants are again anticipated to account for the majority of this growth, with earnings forecasts exceeding 20 per cent, whereas the rest of the index is projected to grow at a more modest pace of around four per cent. Corporate guidance for 2026 has been cautiously optimistic. Investment in AI and automation is expected to continue, while companies simultaneously emphasise the need to safeguard profitability in the face of economic uncertainty. Markets have reacted with notable sensitivity to any deterioration in outlook. High valuations leave little margin for disappointment.

Equities continue to offer the strongest return potential

Nordea’s House View continues to favour equities. Strong and broadening earnings growth is expected to underpin further positive market development. Regionally, Europe remains overweight in our recommendations, based on expectations that an improving economic environment and lighter regulation will support corporate earnings. North America, Finland and emerging markets remain at neutral weight, while Japan stays underweight.

Corporate earnings growth is expected to improve in all geographic regions this year.

Healthcare and financials are viewed as the most attractively valued sectors with stable growth prospects. The outlook for consumer staples is weaker, and the sector remains underweight in our recommendations.

Compelling yields in fixed income

In fixed income markets, the beginning of the year brought slight upward pressure on long term yields in the United States. The yield on the US 10 year Treasury approached 4.3 per cent, while its German equivalent hovered around 2.8 per cent. Central banks are expected to remain largely in a wait and see mode. Investors currently anticipate one to two rate cuts from the US Federal Reserve this year. The ECB, meanwhile, is expected to keep its deposit rate unchanged in the coming months.

For euro area fixed income investors, bond yields once again appear attractive, as slowing inflation translates into improved real returns. We continue to emphasise the importance of sound diversification within fixed income portfolios and maintain a neutral weight across all bond categories in Nordea’s House View. Among Nordea’s funds, Savings Fixed Income fund provides diversified exposure to bond markets.

February outlook in brief

Strong earnings momentum and the broadening of profit growth support equities, but high valuations and political uncertainty add to market sensitivity. The key message for investors is that returns in 2026 are expected to be driven primarily by corporate earnings growth. Equities still offer the highest return potential, though occasional volatility—much like that seen in January—should be expected.

Asset classes

Bond markets

Equity markets

Returns by asset class

Asset class returns for the past 12 months: Global equities 7,7 %, Eurozone high yield bonds 4,7 %, Eurozone corporate bonds 4,1 %, Eurozone government bonds 2,3 %.

Asset class returns for the past 12 months: North America 2,4 %, Europe 16,7 %, Japan 15,6 %, Emerging markets 27,8 %, Finland 31,7 %.

Responsible editor
Antti Saari, Wealth Management, Nordea Bank Abp
antti.saari@nordea.com

Content production
Hertta Alava, Ville Korhonen, Antti Saari, Teemu Mäkelä

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Investment services are provided by Nordea Bank Abp. The issuer of the products described in this message is Nordea Funds Oy. The information provided in this message is intended as general product information only. This information is not an exhaustive description of the products or the risks related to them and does not constitute investment advice or recommendations. Remember that investing always involves risks. The return on your investment may fluctuate, and you may lose some or all of your capital. Past performance is not a guarantee of future results. Before making any investment decisions, you should read the relevant prospectus and key investor information documents for more details about the investment product.

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