“A continued decline in inflation rates indicates that central banks may conceivably start cutting key interest rates around mid-2024. As a result, investors’ risk aversion is starting to ease. Meanwhile our main scenario is a relatively short, shallow soft landing for global economic growth. Yet we must also get through this late-cyclical phase, where there is a risk that the slowdown will be worse than expected. We are thus advocating a neutral risk level, since we see potential problems in the short term but good opportunities in the medium term,” says Fredrik Öberg, Chief Investment Officer at SEB's Private Wealth Management & Family Office Division.
During 2023, we have not applied recession portfolios but have instead maintained broad risk diversification with a neutral allocation between asset classes. This means that we have been helped by large US growth companies and the strong dollar, as well as by the positive momentum prevailing in Sweden among companies with lower-than-average valuations. We have gradually reduced this factor exposure, but we still have a slight overweight in portfolios that are not pure value portfolios. In our fixed income portfolios, we have extended our average maturity after previously maintaining a very short maturity. Our proportion of corporate bonds is slightly higher than in the index. We are overweight in fixed income investments at the expense of alternative investments and hedge funds in mandates that include the latter asset class. Illiquid investments come in many guises, and by definition they have a longer investment horizon − making them excellent complements to a traditional portfolio.
This edition of Investment Outlook also includes two theme articles:
- GLP-1 is changing the world
- Electricity markets and their price dynamics
You will find the full report, plus a video, at www.seb.se/investmentoutlookreport.