Our weekly update 2023-01-18

				Click here to read in a browser

Our weekly update From inflation figures to corporate earnings figures

After a gloomy 2022, the new stock market year has started significantly better − with gains of about 4% for America’s broad S&P 500 equity index and 7% for the Stoxx Europe 600 so far in January. The Swedish market has also had a strong start to the year, which we all welcome. US inflation has peaked and is now falling, while energy prices are lower in Europe − two important factors that have increased investors’ risk tolerance.

US inflation continues to surprise on the downside
Last Thursday’s US consumer price index (CPI) figures confirmed that inflation in the United States has peaked. For the sixth consecutive month, inflation slowed. Year-on-year CPI was 6.5% in December, compared to 7.1% in November. It is too early to declare victory over inflation, since the US labour market must also show signs of a cooling, but there are encouraging signals such as that the pace of hourly earnings growth slowed in the latest survey. Our view is that a 25 basis point Federal Reserve rate hike in February is set in stone, and we see continued indications that it may be the last such increase in this economic cycle.

Swedish inflation is stuck at high levels
The new Riksbank governor, Erik Thedéen, is not exactly getting an easy start. In contrast to US inflation figures, Swedish inflation was surprisingly high in December. As measured by CPIF (CPI excluding interest rate changes), inflation rose from 9.5% in November to 10.2% in December. This was more than one percentage point higher than the Riksbank forecast and a couple of tenths above ours. Much of this was due to electricity prices, which fluctuate sharply. We knew in advance that they would be unpredictable. On the other hand, with US inflation falling so clearly there is a higher probability that Swedish inflation will also slow this year, but the rest of Europe is lagging this trend. In Sweden, there are further inflation risks due to the weak krona.

We are shifting our focus from inflation to earnings
Focusing our attention on something other than inflation, the quarterly report season kicks off in earnest this week. This will provide an exciting change of pace. The first major US bank reports came as early as last Friday, and they lived up to expectations. Overall, net interest income pushed the earnings of these banks higher due to the Fed’s key interest rate hikes last year. On Friday, January 20, the Swedish metals group Sandvik and telecoms giant Ericsson will announce their results. It will be interesting to see how Ericsson is doing after last quarter’s disappointing report. Sandvik's report will provide an important indication of how the Swedish economy is performing.

Best regards
Emma Brage
Investments
Private Wealth Management & Family Office

Please contact your private banker if you
have any questions or concerns, or if you
would like to change your subscriptions.

	‌	© 2022 Skandinaviska Enskilda Banken AB (publ).

This document produced by Skandinaviska Enskilda Banken AB (publ) (SEB) contains general information about financial instruments and financial services that SEB markets, sells or transmits. SEB is the global brand name of Skandinaviska Enskilda Banken AB (publ) and its subsidiaries and branches. SEB is authorised and regulated by the Swedish Financial Supervisory Authority, Finansinspektionen. Although the content is based on sources judged to be reliable, SEB will not be liable for any omissions or inaccuracies, or for any loss whatsoever which arises from reliance on it.

Historical returns are no guarantee for future returns. The value of financial instruments can both rise and fall and it is therefore not certain that you will get back all the invested capital. In some cases, losses can exceed the initial amount invested. Where either you or the underlying funds invest in funds or securities denominated in a foreign currency, changes in exchange rates can impact the return. For funds with share/unit classes that aim to currency hedge the return against movements in the fund’s base currency value, there is no commitment or guarantee that the currency hedge will be achieved. Neither the material nor the products described herein are intended for distribution or sale in the United States of America or to persons resident in the United States of America , so-called US persons, and any such distribution may be unlawful. The possibility to offer financial instruments can also be limited in other jurisdictions. This document may not be used to market, sell or transmit financial instruments in jurisdictions where this is unlawful. You are fully responsible for your investment decisions and this presentation material may not alone constitute the basis for such a decision. Instead, any investment decision shall be based on the detailed information about the financial instruments found in for example their fact sheets, information brochures, prospectuses, marketing material and/or product sheets, often available at seb.se. For funds that are not managed by SEB’s fund management company, this information can be obtained free of charge from your advisor at SEB.

Information about taxation. As a customer within international Private Banking/Private Wealth Management & Family Office, you are obliged to keep yourself informed of the tax rules with respect to bank accounts and financial transactions applicable in the countries of your citizenship, residence or domicile. As and when required, please request appropriate tax advice from relevant professionals before initiating financial transactions. You must yourself provide relevant authorities with information as and when required.

For UK residents
Skandinaviska Enskilda Banken AB (publ) is authorised and regulated by the Swedish Financial Supervisory Authority. Deemed authorised by the Prudential Regulation Authority. Subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.