An unexpectedly weak month

The US Federal Reserve came into play and raised its policy rate for the first time since the financial crisis. The markets were well prepared, so the dollar fell and long-term bond yields did not move much following the hike, concludes John Strömgren who manages Carnegie Strategy Fund.

Stock markets had an unexpectedly weak month. Soft US economic data means there is more scepticism of the central bank’s decision to raise interest rates. Further hikes are expected in 2016, which are feared, at best, to result in weak growth in the US economy.

At the same time, there are reports of continued slowdown in China. Conversely, there is better momentum in Europe, not least in Sweden, but the stock markets are mainly driven by expectations for the global economy.

The fund dropped 3.3 percent in December, but the full-year outcome was a positive 5.4 percent.

Otherwise, 2015 was the year in which hopes that low interest rates would work wonders for the economy were extinguished. One benefit is that expectations for performance in 2016 are now relatively low. This applies to both the economy and the stock market, which emboldens us to increase the proportion of our investments in companies with cyclical activities. That said, the portfolio will remain focused mainly on stable companies.

We bought into Gränges back in November, a typical cyclical company. In December, we continued on this path and purchased Atlas Copco and Finnish Metsä. These companies are currently being overlooked by many investors as a result of concerns about the economy, leading to realistic valuations and, for these two, a dividend yield in excess of 4 percent.

There are also two new bond holdings. We participated in the first issue from B2 Holding and in WestAir’s issue. Norwegian B2 Holding is similar to Intrum Justitia and Lindorff, but smaller. WestAir operates air freight in the Nordic region.

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