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In contrast to 2016, when the year started off with a sharp decline in global markets, 2017 did not present any substantial market corrections. The sailing was smooth, and as the year came to an end global equities (measured by the MSCI World Index) had risen for 14 consecutive months. Such a streak of monthly gains had not occurred since the inception of the MSCI world Index in 1969.

The optimism in financial markets was widespread throughout the year. A record amount of new issues came to the Nordic high yield market, amounting to more than NOK 120 billion, and the large US companies continued to set a record amount of new issues to the market, for the sixth consecutive year.

All in all, the 2017 market conditions provided a favourable backdrop for our funds.

The financial market strength throughout 2017 was less than obvious when entering the year. Firstly, in terms of valuation, equity markets were looking rather stretched. Secondly, we felt a somewhat synchronised withdrawal of monetary policy from global central banks, with the US Fed in forefront continuing its hiking cycle. On top of that, geopolitical tensions and concern regarding political decision-making had potential to stir markets.

The synchronised growth upswing in the global economy became increasingly evident throughout the year, and provided support to risk assets. Crude oil prices rose by 10 per cent over the course of year, also benefiting from the economic upswing in both EM and DM, and ended the year at a price per barrel of 76 dollars.

Interestingly, despite the evident improvement in the economic backdrop, interest rates did not adjust accordingly, at least not initially. Hence, interest rates were at roughly the same level when exiting the year as when we entered the year. In Norway, money market rates declined throughout the year, while longer dated interest rates remained rather unchanged.

The goldilocks scenario, characterised by gradual economic improvement combined with still low interest rates, managed to fend off most potential market disruptions, and resulted in the stellar equity performance in 2017. Measured in local currency terms, global equities* returned 22 per cent. The Norwegian stock market followed global equities closely, with the benchmark index returning 19 per cent and the mutual fund index returning 17 per cent. Tighter credit spreads ensured a solid year also in credit markets, which enjoyed a more normal year after several years of heavy restructuring activity in the oil service sector.

All in all, the 2017 market conditions provided a favourable backdrop for our funds.

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