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Recovery, temporarily interrupted

Image of a forest.

We will soon put a very difficult year behind us. The situation is now more stable, though we have suffered a new setback as the spread of COVID-19 increases. Encouraging indications about impending vaccines and a US election outcome that was well received by investors will help us to feel more confident and lift our gaze to 2021 and 2022. We will gradually reopen our societies in 2021. If we react as we usually do, there should also be a pent-up need for consumption.

Shifting from emergency responses to forward-looking initiatives

The return to a more normally functioning society and a more robust economic situation will continue to be supported by central banks, which will ensure that there is plenty of liquidity in the system over the next few years and that key interest rates and government bond yields do not skyrocket. Concurrently, we will see unusually far-reaching fiscal stimulus programmes. As the recovery strengthens, these programmes will shift from emergency responses to forward-looking initiatives, for example as part of a worldwide green transition.

Low interest rates and bond yields will mean few alternative sources of returns

The price of financial assets is now quite high from a historical perspective. However, this is balanced by a bright medium-term forecast for both GDP growth and corporate earnings. Interest rates and bond yields are also extremely low and are expected to remain so for some time to come, which means there are few alternative sources of returns. This will affect relative prices and create tolerance for higher asset valuations. Our investment portfolios are still positioned for rising stock and corporate bond markets, but historically high pricing is limiting the extent of our overweight in risk assets.

Investment areas with potential

As usual, Investment Outlook includes theme articles on current topics. The first is an in-depth look at dividends. Companies that pay high dividends have had a tough time in the stock market for some years, even though high dividends should intuitively be attractive when interest rates and bond yields are low.

Our second theme article describes a development stage that we call “Industry 4.0”. It outlines what modern methods there are for running an industrial company today as efficiently and flexibly as possible, and which Swedish companies are at the forefront of these developments.

Return expectations, %, next 12 months (SEK)




Advanced economies 8.8 18.0
Emerging markets (local currencies) 8.9 17.3
Sweden 8.9 18.1

Fixed income investments



Government bonds -0.3 1.4
Corporate bonds, investment grade 
(Europe/US 50/50, IG)
1.7 7.0
Corporate bonds, high yield
High Yield (Europa/ USA 50/50, HY)
2.7 11.1
Emerging market debt
(local currencies, EMD)
6.5 10.4

Alternative investments



Hedge funds 3.5 7.0


*24 month historical volatility

Source: SEB, forecasts November 2020

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