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Are we in the clear...?

China has a stable political government for the foreseeable future, the Democrats did better than feared in the US mid-term elections and energy prices have fallen sharply. Is the greatest danger and uncertainty for the financial markets over? Maybe not completely. We still have an ongoing war in Ukraine, with the imminent threat of potential escalation. While inflation shows signs of having peaked (especially in the US), there is great uncertainty about how quickly it can come down again. In the meantime, central banks will continue to raise interest rates, which should lead to a slowdown in the economy. Unemployment is still close to an "all-time low", which will probably have to worsen before we see a sufficient slowdown in wage and price growth. So no, the danger may not be completely over, BUT we must remember that there is a lot of negative news that has already been priced into the stock and bond markets. And as mentioned, there are a good number of uncertainties that are no longer uncertain. It is timely to notice how much space the electricity price got in the public debate when it rose NOK 2-3-4-5/kwt, and how little we hear about it having come down again to below NOK 1. Again, it is a good illustration of how difficult it is to look for the "right" time to invest. It's like nobody comes to the news desk and says "NOW is the right time".... We have now put behind us one of the worst 3/4 years in the history of the stock market, and in addition one of the worst years for fixed income instruments. In sum, a classic Balanced portfolio has had the second worst year since 1920.

Now it must quickly be pointed out that our portfolios have done significantly better than this, both because of currency effects but also because of the investment choices we have made. But the point is that the market has corrected sharply, which has resulted in substantially cheaper shares and bonds than what we had 6 months ago. One of the most important "disclaimer" phrases in our industry is that "historical returns are no guarantee of future returns". Therefore, we can never base investment decisions on historical observations. But now it is once again the case that there are many who believe that there are many psychological factors that play a role in the movements in the stock market. Some of this has been reflected in historical statistics which show a certain pattern in that the period October to May has on average produced a better return than May to October. Now, of course, it won't be like this every year! But, if we want to be able to talk about what historically is a "good" period in the market, then we are entering it now. In any case, we would like to invite you to a webinar where we discuss these points, as well as questions from you.


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