Bull market heats up and expands

The global bull market has spread almost everywhere, even to the godforsaken Nasdaq Helsinki. The broad-based increase reflects a healthy market, fueled by optimism about earnings growth. For example, since the fall of 2023, the S&P500 index is up 20% and gold is up over 30%. The Finnish nickname of the domestic stock exchange has changed from Hesuli to Hebulli with a 10% rise. Incidentally, the OMXH25 index on the Nasdaq Helsinki is up about 20% from its October lows, which some consider to be the bull market threshold.

The boom has also hit energy companies, which are often saddled with debt and known for their horizontal price development. US energy companies have risen nearly 30% in six months as AI hype has taken hold in the sector. Data centers use a shocking amount of electricity. In a short period of time, electricity demand forecasts in the US have taken a bullish turn. The country's electricity demand projections have risen from 2.6% annual growth over the next five years to 4.7% - and the rise continues. Although Europe has not yet seen a similar data center boom, energy companies, including Finland's Fortum, have risen on the stock market. However, the company's CEO touted the impact of data centers on electricity demand in the latest quarterly interview on inderesTV (in Finnish). The green transition and reindustrialization of the West are also driving electricity demand.

Raw materials that reflect the needs of the real economy, such as copper, which is voraciously used in the green transition, construction and industry, have rallied. Copper's rise is also being driven by US inventory shortages, the Suez blockade and speculation, but all in all "Dr. Copper" is often seen as a sign of an improving global economy.

In addition to the equity markets, there is a sense of glee in the bond market. Overall, bonds have performed poorly in a warmer inflationary environment (for example, the Bloomberg Global Bond Index is still about 15% below its 2021 peak). But borrowing seems to be worthwhile: Credit spreads, the interest rate differential between risky corporate bonds and the 10-year "risk-free" US bond, have narrowed as they did before the financial crisis in 2006. 

The global bull market, which began in the fall of 2022, has taken place during a period of sustained skepticism: There are worries about a US recession and China's economic recovery has not lived up to expectations. The eurozone has avoided the worst of the recession, but economic growth here is very modest. However, even the wild bull market that followed the financial crisis was accompanied by the sound of doomsday trumpets. There's always something to worry about. At the point when investors forget about all the risks, as in 2021, you need to head for the exit of the stock market.