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Market Outlook: A focus on the report season

The negative trend of recent weeks has continued in many markets. Between January 7 and January 14, America’s tech-heavy Nasdaq stock exchange continued to lose ground, and the broad S&P 500 equity index fell by 0.3%. Sweden’s All-Share Index (OMXSPI) was down 3.8% for the week and has now lost 8% since December 30. Ten-year US Treasury yields have continued upward and are now around 1.87% − their highest since early 2020 − while 2-year yields topped 1%, also for the first time in two years.

Oil prices have climbed in response to concerns about supply disruptions in the Middle East. Brent crude is now trading at around USD 88 per barrel, its highest level in more than seven years.

The world

Thin week on the macroeconomic front

Aside from central bank announcements from Norway and Turkey, plus inflation figures from the United Kingdom, this coming week is rather thin on the macroeconomic front. The focus of attention is shifting instead to the US corporate report season and developments in the fixed income market.

The United States

Markets are concerned about coming US rate hikes

In the United States, the fixed income market is now pricing in more than 100 basis points in Federal Reserve key interest rate hikes this year, with a small probability of a 50 bp hike in March. “We see it as more likely, if the Fed wants to increase the pace of austerity, that the FOMC signals more and faster hikes rather than larger ones,” wrote SEB macreconomist Per Hammarlund in yesterday’s Nordic Alert.

The US central bank’s Federal Open Market Committee (FOMC) is now entering a “blackout period” ahead of next week’s policy announcement. It remains to be seen whether this will lead to less market concern.

The quarterly corporate report season has begun

The US report season has begun. So far more than 25 of the 505 companies in the S&P 500 have reported their fourth quarter 2021 results. Things look good on paper, but the market response has been underwhelming.

The Nordic countries

Norway eases pandemic-related restrictions

Last week Norway relaxed some of restrictions that were re-introduced in mid-December. Public health officials believe that COVID-19 transmission – now dominated by the Omicron variant − will continue to increase, but the number of hospitalisations has recently fallen. Still in place are various social distancing recommendations, which include working from home where feasible.

On January 20, Norges Bank will make a policy announcement and is expected to leave the Norwegian key interest rate unchanged at 0.50 per cent.

Our market view

2021 – what happened?

A positive start was followed by continued recovery in the spring and summer before an initially shaky autumn turned into a rebound due to strong company reports

The year in retrospect

This is how markets performed

Looking back, 2021 was a very good year for investors. Returns in the fixed income market were modest, but stock markets provided very solid overall returns, driven by corporate earnings that climbed by around 50% globally – more than for decades.

Very strong returns on Swedish and American stocks

On January 25, this year’s first quarterly Nordic Outlook – SEB’s flagship macroeconomic report – will be published. Please contact your private banker if you have any questions or concerns, or if you would like to change your subscriptions.