When will the US market drop?

Two steps forward, one step back has characterised the market upturn over the past year, so the downturn in November was perhaps not particularly surprising. Nasdaq Stockholm fell by more than 3%, driven by profit-taking combined with very negative buzz surrounding the housing market, the effects of which have spread to many more sectors.

The surprising thing is not that Nasdaq Stockholm, after yet another strong year, is recoiling slightly, but that the US is not. The fact is that the US is breaking records almost daily, partly driven by upcoming tax reductions (which it seems for the first time will go through), but primarily by unlikely price upturns for a few large tech firms.

If Nasdaq Stockholm is already a little nervous, how will it manage a downturn – even if only a profit-taking – that is going to come sooner or later in the US?

The weakness in the housing market is likely to persist for a couple of quarters and probably result in lower than expected growth in Sweden for the next two or three years. The rate of new construction must slow down fast, which is likely to happen the hard way through massive price reductions and projects/land returned to the local authorities (and thus never started and, unsold tenant-owned flats turned into rental units. Perhaps we will finally understand the significance of the monthly housing association fee to the selling price and thus count m2 plus debt in the association when we buy flats in the future.

Several transactions characterised the portfolio during the month. Holmen sold land in Jämtland at almost four (!) times book value, and half of that is unusable (!). Additional proof that we cannot see the forest for the trees.

Dometic made a major acquisition in the US, which is likely to increase the company’s profits by 20% in the next few years. The stock is now being traded at a 30% discount against the rest of the market, in spite of a fabulous market position, high margins and high organic growth.

We increased the holding in Investor during the month because the discount suddenly rose again to nearly 25%.

More about the fund

Sverigefond A

Carnegie Sverigefond invests in listed Swedish equities and contains the country’s best and most stable companies. We invest long-term in value companies with sustainable businesses, strong balance sheets and attractive...

More info
Buy fund

More articles

A bright future for investors who lift their gaze
Carnegie Sverigefond

A bright future for investors who lift their gaze

The Stockholm exchange climbed further in June as the world continued to open up. Most signals now quite clearly indicate a strong recovery in China, and hopefully Europe and the...

Simon Blecher 2 July 2020
The stock market and society are opening up
Carnegie Sverigefond

The stock market and society are opening up

Every investor around the world is wondering why stock markets are rising. The simple answer is because no one wants or expects it (!); everyone is waiting for a downturn,...

Simon Blecher 8 June 2020
Kinnevik is well timed – at a discount
Carnegie Sverigefond

Kinnevik is well timed – at a discount

As so many times before, the stock market chose to rise steeply and look to the future, right in the middle of one of the worst crises ever and just...

Simon Blecher 7 May 2020