Equity markets in the Nordic countries delivered a return of 1.2 per cent, according to MSCI indices in local currency. This is, incidentally, identical to the long-term average since inception of these indices at the start of 1970.
In other words, at least in terms of equity returns in the Nordics: August was as average as you get it.
Before you take this as a synonym for "normal", let me point out that it is in fact quite rare. Equity markets don't generally deliver average returns. Of all months from January 1970, little more than 20 per cent have a return between zero and twice the average. This holds for the Nordic region in aggregate, for Sweden and Norway individually, and for the USA, for that matter.
In the US, August was an even better month, with a return according to MSCI of almost 3.0 per cent. Here, however, the long-term average is lower, just below 1.0 per cent. One might easily jump to the conclusion that August was rather exceptional.
Once again, intuition is misleading. Close to one third of all months in the US stock market have been better than August this year. Then again, some 37 per cent of months have yielded a negative return.
I don't intend to bore you with a discussion of actual vs. textbook normal return distributions. It's just a reminder that monthly returns fluctuate quite a bit. Don't read too much into one month.
And please don't try to compound that 1.2 per cent return figure. The monthly compound average is just above 1.0 per cent.
It does translate into an annual average of more than 13 per cent, however. With all due reference to the compulsory disclaimer that historical returns are no guarantee of future returns: You can see that sitting through monthly swings has been richly rewarded.
Finn Øystein Bergh
Chief Economist & Strategist
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.