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10 January 2018, Sweden | Mutual Funds | News

Market trends

We can sum up 2017 with one word: stability. Despite continued interest rate hikes and trimmed balance sheets by the US Federal Reserve, despite reduced purchasing of securities by the European Central Bank, despite an inconsistent US president, and despite North Korea launching missiles and testing atom bombs, the world's financial markets have been stable. Even in Sweden, which for many years has been something of a growth wonderkid and where reality has caught up, the market as a whole has been stable.

In many ways, 2017 has been an unusually stable year. For example, the US S&P 500 with dividends yielded a positive return in every month, something that has not happened at any time previously in the last 30 years. The VIX index, a measure of how market participants price the forward volatility of the stock market and which is sometimes called the investor fear gauge, has closed below ten on 58 occasions since 1990. Of these 58 occasions 49, or 85 percent, took place in 2017. In other words, unusually stable.

In all this stability, the Swedish equity market has been relatively challenging. Housing prices, which have considerably outstripped disposable incomes for many years, have fallen since the spring of 2017. This has obviously affected housing developers, construction companies, the Swedish krona and, to a certain extent, Swedish banks, which have significantly underperformed the market as a whole. HM had a weak year on the stock exchange and lost a third of its market capitalisation. Fingerprint Cards, a favourite among small investors, had an even tougher 2017 and lost two-thirds of its value. Overall, however, the Stockholm stock exchange saw a stable trend, of course, and rose 9.47 percent after dividends.

Commodity prices as a whole were stable this year, but the picture for the underlying sectors was varied. Industrial metals, which naturally reflect the state of the economy, performed well, gaining over 20 percent in some cases. Energy prices were more mixed, with oil rising and natural gas down sharply. The worst performers were agricultural products, and sugar was the weakest commodity, losing around one-third of its price.

In the wake of strong growth and expansionary monetary policy, higher risk high-yield bonds were strong performers, and the additional compensation received by investors for these fell by half a percentage point. Government bonds, like so many other investments, were stable, and the Swedish ten-year yield moved in a range from 0.35 percent to 0.75 percent, and the change from the start of the year was 10 basis points up/down.

The adage that nine out of ten worries never come to pass could not have been intended for the 2017 financial markets, but the idea does capture the essence of this year. Thank you for your confidence in us.

 

Sweden

Thomas Elofsson

Head of Portfolio Management and Fund manager
Direct: +46 8 614 25 62

Risk information

Investments in fund units are associated with risk. Past performance is no guarantee of future returns. The money invested in a fund can increase and decrease in value and it is not certain that you will get back the full amount invested. No consideration is given to inflation. The Catella Balanserad, Catella Credit Opportunity and Catella Hedgefond funds are special funds under the Swedish Alternative Investment Fund Managers Act (SFS 2013:561) (AIFM). Catella Sverige Aktiv Hållbarhet and Catella Småbolagsfond may use derivatives, and the value of the funds may vary significantly over time. The value of Catella Sverige Hållbart Beta may vary significantly over time. Catella Avkastningsfond may use derivatives and may have a larger proportion of the fund invested in bonds and other debt instruments issued by individual national and local authorities and within the EEA than other investment funds, in accordance with Chapter 5, Article 8 of the Swedish Investment Funds Act (SFS 2004:46). Catella Nordic Long Short Equity and Catella Nordic Corporate Bond Flex may use derivatives and may have a greater proportion of the funds invested in bonds and other debt instruments issued by individual national and local authorities and within the EEA than other investment funds. For more details, complete prospectuses, key investor information, and annual and half-yearly reports, please refer to our website at catella.se/fonder or phone +46 8 614 25 00.
Last changed: 10 January 2018

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