Skip to main content

Tax cuts for US companies raised earnings on Wall Street, which, by far, is still the world's major stock exchange. Global growth forecasts were upgraded and markets seemed to shake off fears of a trade war – despite incessant news reports on new initiatives by US President Donald Trump and his administration.

One month into 2018, a new world index record was set: The MSCI World Index had recorded consecutive months of positive returns. That series was broken in February, whereupon the markets continued to rise. In the course of the year, record-long bull runs were recorded in the US economy as well as the US stock market.

Then the market winds shifted. The last quarter of 2018 offered falling oil prices, falling stock prices and falling bond prices.

By the end of August, close to ten years after the Lehman Brothers bankruptcy sent the world's markets spinning, we were able to note that the return over these ten years had been more than satisfactory – even though this period started just before the historic fall in the autumn of 2008.

Then the market winds shifted. The last quarter of 2018 offered falling oil prices, falling stock prices and falling bond prices. While Brent Blend was trading at $ 86 a barrel in early October, on New Year's Eve oil prices had fallen to 53.80. The Oslo Børs benchmark index, in which oil-related stocks have a notable weight, lost almost 16 per cent from its peak at the end of September. After rising earlier in the year, the benchmark index ended just below the zero line. At the same time, spreads on global high-yield bonds increased by somewhere between 1.6 and 2.2 percentage points, particularly in the US – where, in addition, the Fed funds rate was raised by half a percentage point.

In the Nordic countries, the bond market got off more easily. Here, credit spreads were higher in the first place, and a significant proportion of floating-rate bonds meant that the modest increase in interest rates in the last quarter – Norwegian money market rates rose by a quarter percentage point – did not have much of an impact. In addition, the fall in oil prices contributed to the NOK weakening throughout the year. Securities in dollars and euros thus received an additional contribution to returns from the exchange rate for Norwegian investors.

All in all, despite the final turmoil, 2018 became a year of challenging but acceptable conditions for our funds. 

Download