Skip to main content

We have had an expansive monetary policy ever since the financial crisis, but we are now entering a new paradigm where this policy is reversed and the key interest rate will see several rate hikes. Increased interest rates are a result of a strong economy, which in turn supports corporate earnings. We believe this speaks for a continuation of increasing share prices. If the interest rates are hiked too much, it will be negative considering the debt ratio in both the private and the public sector globally. One should especially keep an eye on short-term interest rates not surpassing long-term interest rates.

The pricing of shares has not yet reached a level where it would be reasonable to throw in the towel. A market correction might be probable, but historically, steep declines have only taken place in considerably more expensive markets than what we see today. An exception could be the US, where the share price to book value ratio currently is at a historic high level. One should, however, keep in mind that seven of the ten companies with the largest market cap are technology companies which tend to be substantially more expensive than the average company.

Read the complete semiannual report here