IO Summary

The overall growth picture from September’s Investment Outlook still stands, with annual global GDP growth of just over 3 per cent this year and in 2025-2026. One important change, however, is that the growth gap between the US and the euro area persists. Our forecast of convergence in their growth rates is being delayed. Current conditions differ markedly between the US and the euro area. After several years of strong growth, the GDP level is close to trend in the US but clearly below it in the euro area. Going forward, US growth will be driven by a strong labour market, rising real incomes and lower interest rates. At the same time, several factors suggest that we will have to get used to lower growth figures further ahead. Emerging market economies are growing by just over 4 per cent overall. China’s economic problems have intensified this year, and Beijing’s monetary policy stimulus and measures to support equity and real estate markets have not been sufficient. Overall, this means that a global soft landing is still our main scenario but that ‒ among other things ‒ regional divergences will lead to different needs for monetary policy support via policy rate cuts.

Overweight in risk assets

The drivers that we expect to benefit risk assets going forward include stable and healthy economic conditions, which should gradually encompass more cyclical dynamism. This should happen as key interest rates continue to be lowered and capital spending increases. Several powerful structural forces will also continue to operate, such as AI and general digitisation, electrification and automation. If the economy stabilises and broadens thanks to several parallel drivers ‒ despite the threat of higher tariffs ‒ we may also see more evenly distributed returns in the stock market. It remains to be seen whether this is wishful thinking or whether it will become a reality. One sign that this could happen is that we are now seeing smaller gaps between 12-month earnings forecasts and earnings outcomes for the past few years. This is true on both a regional basis and at the sectoral level. 

Before we see signs that this is starting to materialise, we will maintain our overweight in global equities vs Swedish equities. In global equities, we are overweighting the US compared to the rest of the world. We favour equities over fixed income investments, although this overweight is moderate. In fixed income investments, we have a somewhat longer duration than in our benchmark indices, and we have a certain underweight in high yield bonds due to tight credit spreads. In portfolios that include liquid alternative investments, such as hedge funds, we underweight these compared to fixed income investments.

Stock market performance

Equities look set to deliver high returns this year despite volatility, especially in the US stock market, which has risen sharply since the presidential election. Relief over the clear election outcome contributed to the rise, but above all, the market likes Donald Trump’s growth-friendly proposals, including corporate tax cuts and deregulation. Normally, the world’s stock markets move in a rather synchronised manner, but since the election the US stock market has distanced itself from other bourses, which is perhaps not so surprising since Trump has clearly declared that his second administration will pursue economic policies primarily aimed at benefiting the US.

AI redraws the map and Asia’s “forgotten” jewels?  

One clear structural driver behind this year’s strong stock market returns is artificial intelligence (AI), whose power we analyse in our first theme article. Our second theme covers the ASEAN region: 10 fast-growing countries in South East Asia between China and India.

• Theme: AI redraws the map – which Swedish companies can benefit?
• Theme: The ASEAN countries – Asia’s “forgotten” jewels?  

Global equities

• US equities will enjoy an advantage in the short term 
• The stock market likes Trump’s growth-friendly policies (so far) 
• Quarterly earnings are defying anaemic macroeconomic growth 
• Record-high valuation gap between the US and the rest of the world

Fixed income investments

• The central banks rate cutting cycle will continue, with varying force 
• The key rate differential between the ECB and the Fed is expected to widen 
• Limited movements are expected in EUR and SEK bond yields, but with some risk in USD 
• Record-narrow credit spreads for high yield bonds, with limited room to shrink further

Nordic equities

• Advantage Sweden ‒ growth will pick up in 2025 
• The US economy will benefit, but the impact on Nordic companies is uncertain 
• The bond yield trend is no longer entirely favourable 
• The economic cycle is close to bottoming; rotation has already begun 
• Nordic large cap valuations are neither attractive nor off-putting