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Economic data now shows significantly slowing growth, although the US is steaming on. Preliminary GDP figures indicate the Swedish economy shrank in the second quarter, and half-year corporate reports witnessed slacker demand.

However, central banks around the world continue to signal that easing will be considered if the economy weakens, which kept markets in a fairly good mood through July. The trade war between the US and China intensified at the end of the month, causing stock markets to dip. The overall development has caused interest rates to fall, and the Swedish krona to weaken again.

Although several companies testified to a more hesitant market in their half-year reports, the outcomes met our expectations in most cases. Essity’s report was good, but the market was disappointed with its organic growth. Volvo’s report was strong, as usual nowadays, with cash flow a stand-out upside. Lifco met high expectations, and Epiroc surprised positively with higher margins than expected, which led to an upward price reaction.

The fund reduced its equity share in June to below 60 percent, and this did not change significantly in July. The fact that the fund has long been cautious about investing in bank shares has proven successful since these have generally shown poor performance. However, our assessment is that expectations are now very low, even though there are many challenges. With earnings multiples of around 8-9 and a dividend yield of 7-8 percent, expectations are low and, in principle, neither profits nor dividends are projected to rise. Even if the dividends were to fall by 30 percent, the valuations would stand up well against other mature sectors like telecom operators, retailers and real estate. The fund has therefore purchased small positions in SEB and Swedbank. The position in SCA has been expanded.

Exposure has been marginally increased on the bond side, in existing holdings like Heimstaden and Nordea Liv & Pension, while exposure to Intrum has been reduced.

The fund rose 0.3 percent in July, and the gain so far this year is 17.1 percent.