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Growth worries offset by rate cut hopes

The actual inflation rate remains higher than desired and labour markets have proved stronger than expected. This, in turn, will lead to a period with a higher risk of consolidation or slight downturns for risk assets. However, inflation is continuing to fall. It should not be too long until investors begin to discount falling key interest rates, which will favourably affect the rest of the yield curve and thus fixed income investments. When this happens, general risk appetite will rise, supporting the capital market as a whole. Until then, there is a risk of increased volatility. Valuations and positioning have not reached alarming levels. Nor do we foresee a structural crisis ahead of us, which is why the journey towards the first favourable central bank signal has good potential to be calmer than we might fear.


It is important to have a portfolio that can withstand events such as new banking sector turmoil, a falling Swedish krona and a sputtering Chinese capital market. These are among the events that have created concern so far this year. It is hard to predict exactly what the future trouble spots may be, and we do not know what negative effects may occur after a time lag, triggered by drastically higher interest rates. As a result, our portfolios have a normal weight in equities, with more global than Swedish equities, and we are careful not to unilaterally choose a given type of shares. We also have a normal proportion of corporate bonds − a major contrast to the zero interest rate period, when we had double this weight in the high yield segment. Finally, we have a lower proportion of our assets in alternative investment sub-portfolios, while holding more fixed-income investments that offer good current yields and the potential for extra returns if government bond yields start to fall.

Valuations and stock market performance

Global equity markets have been strong. Recalculated to kronor, they have been given an extra boost by the weakness of our Swedish currency. Higher share prices and downgraded earnings forecasts have pushed up valuations. Along with rising interest rates and bond yields, this has also squeezed risk premiums. The continued focus on falling inflation, upcoming key rate cuts and a revival of economic growth reasonably soon will eventually open the way for a broad stock market recovery, but valuations and slow economic growth momentum suggest that there will be no dramatic gains.

Critical components for technology development and a possible future scenario

This edition of Investment Outlook also includes two theme articles:

Global equities

  • Despite rising interest rates/yields and subdued earnings, stock markets have delivered strongly, led by growth companies
  • Higher share prices and downgraded earnings forecasts have pushed up valuations
  • The Chinese stock market has fallen in popularity, while interest in the Japanese stock market is on the rise
  • Consolidation on stock markets awaits after this year's upturn

Fixed income investments

  • Inflation is still slowing, but the pace varies between countries
  • The US has finished hiking key interest rates and is expected to start rate cuts in the second quarter of 2024
  • The promised Swedish key rate hike of 25 bps to 4.00 per cent will occur this autumn and will be the last
  • Surprising resilience in the American economy is contributing to narrow credit spreads
  • The scope for interest rate cuts this autumn will support emerging markets, but China is a source of concern

Nordic equities

  • Will surging real interest rates cause stock market volatility this autumn?
  • Financial markets foresee inflation falling below central bank targets
  • Low risk premiums on equities
  • Earnings growth will level off
  • Is a weak krona good or bad for the stock market?
  • Huge differences between Nordic stock exchanges
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