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Interest rates provide a recession warning

April’s risk appetite turned into May’s risk aversion. Stock exchanges fell broadly and credit spreads widened. Long-term interest rates fell, and the US yield curve has been inverted for some time, which means long-term interest rates are lower than short-term rates. This is normally an indicator of a high risk of imminent recession.

However, a number of analysts claim that the slope of the yield curve does not have the same significance with interest rates currently so low. Another reasonable explanation for the changing risk sentiment is the escalation of the US trade war, which is now on multiple fronts. Despite this, there have been no reports of significant changes from the companies the fund is invested in.

The fund fell 3.7 percent in May The not-insignificant holding of corporate bonds contributed strongly to the fund’s relatively good resistance to the stock market downturns. The Stockholm stock exchange fell 6.9 percent and the world index lost 5.7 percent in SEK. So far this year, the fund has risen 11.4 (11.7) percent.

Duni was a new equity holding in May. We know it well since its stock is included in Carnegie Sverigefond. Duni makes products for tableware, packaging and take-away solutions, and targets both the consumer and corporate sectors. Its products are mainly single-use and are sold globally, with a market-leading position in Northern Europe. Its growth is stable but limited. The opportunities are found in company acquisitions, geographical expansion and product development. Reduced use of plastic packaging is an opportunity for Duni, which primarily uses recyclable fibre. Sharply increased commodity prices have had a negative impact on profitability in recent years, but measures like cost savings and price adjustments are gradually having an impact on earnings. Moreover, the paper pulp price has now fallen back a lot, and should eventually be reflected in lower raw material costs. The valuation is low for such a stable company, and may be explained by the fact there are few research companies monitoring it.

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