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Didn’t central banks raise rates this month? Yes, they did. The US Federal Reserve, at least, added another quarter point. ECB, having last raised rates at the end of June, waited until 2 August with its next hike, but it was widely expected through July. Here’s the interesting part: Despite higher key rates, short market rates fell (or rose only marginally). With long rates rising moderately, negative term spreads tightened, meaning that this classical recession indicator became a little less pronounced.

The CITI Surprise Index made a turn for the better in both USA and Europe, meaning that new indicators came in above expectations or disappointed less. The cyclically sensitive price of copper rose, as did the price of crude oil, although on the back of further OPEC cuts. VIX (the “fear index”), being halved since the middle of March, stayed at the low level from June. I haven’t checked any sentiment indicators, but I’m sure they pointed upwards in July. Fear subsided in a lot of markets.

This month, however, things looked a bit different from a Nordic perspective. Nordic high-yield spreads rose marginally, Nordic growth stocks – a large number of which are Swedish – fell by 2%, and appreciating local currencies pulled down global returns for both Norwegian and Swedish investors.

This was most pronounced for Norwegian investors, as both dollars and euros fell by about 5% against Norwegian kroner. On the other hand, of course, this should help keep import prices in check and reduce the number of rate hikes necessary to push inflation down. If future interest rates were your major concern, this too should have made your summer a bit more care-free.

On the inflation front, the bad news came from Russia, which declined to prolong the grain export agreement with Ukraine and started hitting grain storage and transport facilities. Surprisingly, wheat prices were little affected. Of course, this is bad news for a number of more important reasons than inflation, but the market reaction is still worth noting. Prices on natural gas for European delivery fell markedly in July, indicating that in terms of the economy, Europe has learned to live with the consequences of the war.

There’s always more bad news around the corner. While waiting, just keep in mind that most of your financial returns is compensation for assuming risk. Bring it on!

 Historical returns are no guarantee for future returns. Future returns will depend, inter alia, on, market developments, the portfolio manager’s skill, the fund’s risk profile, as well as fees for subscription, management and redemption. Returns may become negative as a result of negative price developments. This is marketing communication.



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