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Market turmoil - cause for concern?

For most people - No!

On Monday 2 May, Dagsrevyen reported a "flash crash", a phenomenon that for various reasons causes a sharp short-term fall on the stock market. More importantly, however, this came at the same time as global stock markets have fallen a few percent so far this year.

The fall in the stock market so far this year can largely be explained by the combination of war in Ukraine and rising inflation. While the former reason normally has less and less significance for stock market movements, inflation is somewhat more uncertain both in terms of size and duration. This creates some uncertainty.

When NRK's ​​financial commentator Cecilie Langum Becker is asked if people have cause for concern, she answers yes. She justifies this with the fact that higher inflation will lead to higher interest rates, possibly a sharp increase, and how this can lead to a downturn in the economy, loss of exports, falling stock markets and possible loss of jobs.

Analytically and macroeconomically, she is of course right in describing everything that can happen, but that does not mean that most people should walk around and be worried.

In Norway, we currently have an unemployment rate of 1.9%, which is the lowest level since 2008. Furthermore, we have an inflation rate of 2.1%, although this is most likely to rise somewhat. The United States, which is the economy that everyone looks at when it comes to economic development and stock market development, has inflation that is in excess of 8%. But parts of the explaination is that most of the inflation is considered to be of a temporary nature, much due to reopening after the corona pandemic. The market is pricing inflation here to be about 2.9% in one year.

Regardless, no one knows what the future holds. But given today's inflation figures and unemployment, there should not be much reason for most people to be worried.

So then we are left with a possible fall in the stock market. Should we worry about that?

It all depends on how you are invested. If you have invested in individual shares, derivatives, structured products or the like, which can fall 100%, then there is cause for concern. If, on the other hand, one invests sensibly, with a good diversification and in uncomplicated instruments, then there is much less cause for concern. The most important thing then is whether you have a savings time horizon that is not too short. If you should need these savings within 0-5 years, the risk will increase that the stock market may fall just before you have to withdraw the money. But if one has financial flexibility, and / or a longer time horizon on the savings, then there should be very little cause for concern.

To get a return that is better than bank interest rates, one must take some form of risk. But if you invest broadly and sensibly, then there is only a risk of fluctuations along the way you are left with. These fluctuations along the way should not be a cause for concern, but rather an opportunity to put spare savings capital to work at lower prices. Regardless, our advisors are ready to help you along the way. We also conduct webinars at least once a month where you can ask questions directly to the advisers and managers.


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