A hopeful outlook when the clouds clear

Our market view

Uncertainty surrounding the trade war has eased, and the pace of economic growth appears to be proceeding at a moderate rate. This has allowed capital markets to recover from the intense volatility experienced earlier this spring. While the trade war has provided the U.S. with short-term benefits through increased tariff revenues and investment flows, longer-term risks persist. Higher interest rates and reduced international trade may eventually weigh on the economy. Tariffs have triggered a temporary inflationary impulse, which is widely viewed as transitory. This provides central banks room to cut policy rates. Governments are also expected to support growth through fiscal initiatives. Risk appetite has returned, and valuations have rebounded to elevated levels. Looking ahead to 2026, a broader base of companies, regions, and sectors is expected to support earnings growth. However, the risk landscape remains complex, with key concerns centered around global growth momentum, interest rate developments, and currency fluctuations. These factors contribute to uncertainty around actual earnings growth and corporate margins, leaving the market outlook clouded.

Our portfolio

2025 has been characterized by sharp market swings, with political decisions and tariff turmoil posing major challenges for investors. Rapid declines were followed by equally swift recoveries, underscoring the need for caution and broad diversification. As the market has regained much of its lost ground, elevated valuations raise the risk of a pullback, even as the outlook for 2026 has improved somewhat. Our portfolio maintains a neutral allocation between equities and fixed income, focusing on growth companies with selective exposure to cyclical and value stocks. The fixed income strategy remains conservative, centered on stable bonds. Alternative investments through hedge funds enhance portfolio resilience. We maintain a solid risk structure while remaining prepared to adjust as conditions evolve.

Equities and valuations

Global equities have shown strength despite geopolitical tensions and trade disputes. The U.S. has led the rally, driven by large technology firms and the financial sector, while Europe has lagged. Earnings growth continues to be dominated by the “Magnificent 7,” which have significantly outperformed other companies, although a few other “mega caps” have also contributed. In Europe, banks have performed strongly following ECB rate hikes, but valuations are becoming more reasonable, and full-year earnings forecasts indicate near-zero growth. Looking ahead to 2026, a broader recovery is expected. Emerging markets—particularly Asia and China—have returned to focus, supported by strong technological progress and a more favorable policy backdrop, though risks remain. In the Nordic equity markets, valuation disparities are substantial, creating very different conditions across markets. For the Stockholm Stock Exchange to sustain its upward momentum, a strong catalyst is needed. In Copenhagen, concerns around Novo Nordisk’s legal issues in the U.S. will need to be addressed, and confidence in the competitiveness of its pharmaceutical portfolio restored.

Global equities

• Equity markets have performed strongly over the summer, led by the technology sector
• Major growth companies and the financial sector have delivered a solid earnings season
• Earnings revisions are trending upward in the US and slightly downward in Europe
• Following a strong market rally, we expect a period of consolidation

Nordic equities

• Valuations are diverging across the Nordics
• Earnings forecasts have been revised downward
• Pharmaceutical stocks are trading at a discount
• Will buybacks reduce the discount in real estate companies?
• Signs of a bottom emerging in the forestry sector

Fixed income investments

• Slightly calmer bond market over the summer
• After tariffs, renewed focus on key economic data
• Rising term premiums and questions around the Fed’s future independence remain
• Credit spreads are back near historically low levels

Theme: European security policy

• A new era for European security policy
• Defense spending set to more than double by 2035
• Even stronger growth in defense equipment
• Defense capabilities remain in focus
• Defense companies’ exposure to European defense procurement

Theme: Eastern Europe

• Eastern European equities have outperformed both the U.S. and Europe
• The rally has been earnings-driven, while valuations remain low
• Low valuations are partly explained by sector composition, but not entirely
• Highly profitable, fast-growing banks have been the main driver of index performance
• GDP convergence with Western Europe is expected to continue for the foreseeable future