Despite the challenges, the timing is excellent for starting a Nordic position or adding to an existing one.
“Winter is coming” was the motto of House Stark in the smash hit series The Game of Thrones. Not only a catchy, ominous tagline, the motto served as a reminder for the people in the North that difficult times were ahead.
In the real-life North, winter indeed came with some formidable enemies. We fought the Army of the Dead in 2022, as inflation rose from the grave, and protected the wall in 2023, when central bank rates rose like ladders towards the sky. But now it’s evident that the North prevailed.
Towards the end of last year, naysayers were greatly concerned for the Nordics, especially the Swedish real estate market and even the Nordic economies. Those who pass the sentence should swing the sword, but heads have not rolled. Now, the downbeat Swedish real estate stocks (OMX Sthlm Real Estate) have rallied some 30% from their lows, the weak Swedish currency is up 5% against the Euro in the past three months, and Nordic stock indices have jumped more than 10% from their October nadirs.
Is this rise just the last feeble attempt of the slain King in the North? We think not. These are the green shoots of economic recovery fuelled by expectations of lower rates, declining inflation (i.e. rising real incomes), and export recovery.
It’s still early in the cycle, which has many implications. The traditionally cyclical economies in the North suffer in the downturn but equally prosper and provide strong returns in the upturn. Having seen the downcycle play out, opportunities are now everywhere, but especially in fixed income and credit.
At the bottom of this blog post, you can find our Talking Points for December–January. The document is Evli’s International Team’s outlook on the current opportunities in the Nordic markets. In this edition, we have focused on fixed income and credit, where the risk/return profile is still superior. Here are some key findings:
The winter came, but the North has shown its strength. The timing is great for starting a new position or adding to an existing one – but keeping in mind that an unexpected, shocking plot twist could be right around the corner.
Your House Stark, aka Evli’s International Team
See above slide and further in depth info about fixed income and credit in the Nordics here.