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The MSCI World Index ended up pretty much where it started, with a total return of less than one per cent in local currencies.

Fixed income, on the other hand, is a different story. During the month, spreads on global high-yield bonds shot up by half a percentage point or more (50 to 70 basis points). Even for bonds of investment grade rating, spreads increased by some 10 to 15 basis points. And all this came on the heels of a similar increase the month before, leading to a marked deterioration in bond prices. While the Nordic market saw much more modest movements, bond prices suffered here as well. Going forward, higher spreads facilitate higher returns, but short-term, it's a lot less fun.

The oil market, too, had its fair share of the action, with Brent Blend plummeting to 59 dollars from 76 dollars at the end of October, having touched 86 dollars a few weeks before. Predictably, oil-related stocks took a dive, with energy equipment and services falling some 10 per cent, according to MSCI global indices. And while Oslo Børs got off fairly easy, losing some three per cent, more than one stock in this sector fared considerably worse.

Now, what to make of the disagreement between the stock market and the bond market?

Incidentally, this illustrates the rationale for leaving oil and oil service stocks out of the global stock portfolio, which we've been doing for some years now. Currently, there is a discussion as to whether the Norwegian Government Pension Fund Global should do the same. A publicly appointed expert commission advised against it, but most consultations seem to disagree (as we do). While no conclusion should be drawn on the basis of a few eventful months, it does offer a good illustration.

Now, what to make of the disagreement between the stock market and the bond market?

This is not the first time in history that the bond market paints a gloomier picture than the stock market. Lots of different explanations have been put forward, like bond managers being more focused on the downside (in a way, they should) or in fact of a more pessimistic disposition (proof still lacking). Perhaps different maturities or time horizons are part of the explanation; in a sense, stocks are really long-duration securities, more so than most bonds.

Either way, please note that differences of opinion are part of the game. There is never – like in never ever – complete agreement as to the direction of the market or markets. As an investor, you just have to get used to contradictory information and divergent opinions, not to mention unsettling gyrations. You need to assume short-term risks in order to reap long-term rewards.

That's why you should never really expect expected return.

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