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Upon entering 2019, financial markets were in the grip of gloom, after major stock market declines and increasing corporate bond spreads in the last quarter of 2018. Dimming global growth prospects and an unpredictable end to the trade negotiations between USA and China put a definite damper on the market sentiment.

And yet, 12 more months were to pass before anyone had heard about the coronavirus.

Furthermore, the term spread – the difference between longterm and short-term government bond yields – was about to turn negative in the US, which represents roughly 60 per cent of the MSCI World Index market capitalisation. An impending inversion also in Norway, while of  ignificantly less importance, was one of many indications of a broader phenomenon.

Historically, a negative term spread has been a harbinger of recessions. This time, it was partly brought about by the Fed Funds rate having been hiked by a full percentage point in 2018, the latest increase as late as December 19. At that time, Federal Reserve was still convinced that real economic growth was strong.

When in fact the term spread did turn negative, a few months into 2019, there was no shortage of worried comments (nor of attentive listeners). From August 2018 to April 2019, the number of Google searches for "recession" nearly doubled.

There was indeed reason to worry. In just six months, IMF revised its 2019 global growth estimate from 3.9 to 3.5 per cent, only to be cut even more – down to 2.9 per cent – before the year was through.

Annual review 2019

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