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Just as the last leg of a long trip tends to colour your impression of the
entire journey, the last quarter of 2018 may have made you think that
it was a most unusual year, portending perhaps the end of this long,
profitable cycle. After three quarters of slightly apprehensive bull
markets, the fourth quarter of 2018 offered rapidly falling stock prices
and similarly rising credit spreads.

Let me point out, then, that the calendar year 2018 was in fact well
within the expected range of outcomes for any given year. Global
GDP growth, estimated at 3.7 per cent, was slightly above average.
In Sweden and Mainland Norway, growth came in at 2.3 and 2.0 per
cent, respectively. The S&P 500 lost some four per cent, adjusted for
dividends. The Norwegian benchmark index lost just 1.8 per cent.

With the benefit of a little hindsight, after market reversals at
the beginning of 2019, the gloomy end to 2018 looks like a false
alarm. Keep in mind, though, that false alarms are a regular
feature of forward-looking financial markets trying to divine future
developments. This year, against a relatively stable backdrop, the
predominant theme was the length of the business cycle, or rather
how much was left of it. Would reversal of the extremely expansionary
monetary policies send interest rates upwards, terminating the cycle?
Would inflation resurge? Would there be a recession?


Read the complete annual review by our Chief Investment Officer Finn Øystein Bergh: