IO Summary
Our market view
Since the last issue of Investment Outlook, the market climate has changed drastically. Optimism has been replaced by uncertainty and sharp volatility, with a clear turning point in early April when the US unveiled a new, confrontational tariff policy. Confidence in the American economy and policies has been shaken, leading to capital shifts away from the US to other countries, a falling dollar and weaker US stock markets. Meanwhile, the Swedish krona has appreciated, which has negatively impacted returns on global assets measured in SEK. Tariffs and geopolitics are slowing global economic growth, especially in the US and China, while interest rate cuts and stimulus measures, especially in Europe, are having the opposite effect. Earnings estimates are being pushed lower, and investors’ risk appetite has declined. Despite some stabilisation, an uncertain global picture remains. We continue to see elevated risks in the short-term market situation.
Our portfolio
Because of the current uncertainty, we are avoiding large risks and are instead keeping the portfolio close to normal – with an even allocation between equities, fixed income and liquid alternative investments. In equities, we have a balance between Swedish and global stocks, with US growth companies offsetting Swedish value stocks. In the fixed income sub-portfolio, we have a slightly longer duration and an underweight in high yield bonds in favour of more stable bonds. Our hedge fund exposure contributes to stability, especially in today’s market climate. We regard keeping our portfolio close to normal as responsible, but at the same time we are actively looking for the next possible change as the market situation develops.
Equities and valuations
In local currencies, world stock markets have shown marginal changes, but Swedish investors have suffered losses as a consequence of krona appreciation. Uncertainty about the scale and impact of tariffs has contributed to lower earnings forecasts, especially in Europe. Meanwhile, US growth companies, mainly in the tech sector, are showing continued strength. Europe will benefit from new public investment packages. Their effects will be delayed, but value companies should be able to benefit. In the Nordic region, the market is under pressure from the same uncertainty, with clearly lower earnings forecasts. Nordic stock markets are attractively valued, and we foresee good recovery potential. But there is great uncertainty, and these markets will be strongly affected by political developments.
Global equities
- Rapid krona appreciation has depleted the value of assets in other currencies for SEK investors
- Higher tariffs have a negative impact on growth and corporate earnings, but their effects are hard to assess
- Company reports beat expectations, but future earnings expectations have been lowered
- An increased focus on geographic diversification
Nordic equities
- Tariffs may be crucial for the Nordic stock markets and economies in 2025
- Stimulus measures in the EU and China provide hope
- Reversal of regulatory trend?
- Unclear picture from quarterly reports
- Earnings forecasts have been lowered
Fixed income investments
- Global fixed income markets remain shaky
- Tariff policies still the focus of attention
- Credit spreads have increased from low levels
- We expect central banks to keep cutting rates, but long-term yields are not falling
Theme: Infrastructure investments
- Infrastructure a vital factor for growth and competitiveness
- Countries around the world are launching new investment programmes
- A focus on digital and energy infrastructure
- Public funds not enough; private capital crucial to meet investment needs
- Private infrastructure attractive as a long-term investment
Theme: Global trade
- The US has had big trade deficits for many years
- The main reasons are high consumption and low savings – not weak exports
- Higher tariffs are expected to have a limited impact and may prove costly
- Balanced global trade is desirable, but requires actions by all parties