Investment Outlook: Falling inflation will provide support during slump

China’s economy is gearing up as the rest of the world slows down into a brief, shallow recession in which corporate earnings will hold up well. The investor community is restrained and cautiously positioned, while the corporate sector is thriving and in good shape. Our main economic scenario foresees a slowdown in 2023 and an acceleration during 2024. We support a neutral allocation at the asset class level, combined with good risk diversification, since volatility is likely to persist.

“In this environment of positive and negative forces, since early autumn 2022 we have advocated a balanced approach, in which we have chosen the distinctly defensive portfolios that have been the consensus choice. Well-diversified portfolios with a rather neutral balance at the asset class level are still the recipe we suggest in a late-cyclical environment,” says Fredrik Öberg, Chief Investment Officer at SEB’s Private Wealth Management & Family Office Division.

Allocation
We are maintaining the view that it is wise to continue spreading risks across several different asset classes and sub-classes. In Swedish equities, we have reduced our holdings of pure value companies. In global equities we are overweight in large cap growth companies, which serve as a good complement to our Swedish equity portfolio. For the time being, we are also maintaining the partial currency hedging of the US dollar that we initiated last autumn. Unusually, our fixed income portfolios have a fairly neutral structure in terms of interest rate and credit risk. Our alternative investment holdings are living their own lives; as intended, they have a low correlation with our equity and fixed income portfolios. The overall result is unusually broad portfolios, which at the aggregate level have a neutral weight in equities combined with an overweight in fixed income investments at the expense of the proportion of alternative investments. This composition enabled us to earn positive returns last autumn and during the early-2023 rally, as well as to avoid losing ground when such unforeseen events as bank failures affected the market.

Theme articles
This May 2023 issue of Investment Outlook also includes three theme articles:

• New supercycle on the way – in capital spending
• Cracks in the façade, but a solid foundation – how Swedish banks are connected to the real estate sector
• Why are alternative investments appealing?

Investment Outlook can be read in its entirety or as a 2-page summary at www.seb.se/investmentoutlookreport, where a web video is also available.

For further information, contact:
Fredrik Öberg, CIO, Private Wealth Management & Family Office, SEB
+46 70 767 6179
fredrik.oberg@seb.se

Press contact:
Niklas Magnusson, Head of Media Relations & External Communication
+46 70 763 8243
niklas.x.magnusson@seb.se

SEB is a leading northern European financial services group with international reach. We exist to positively shape the future with responsible advice and capital, today and for generations to come. By partnering with our customers, we want to be a leading catalyst in the transition to a more sustainable world. In Sweden and the Baltic countries, SEB offers financial advice and a wide range of financial services. In Denmark, Finland, Norway, Germany and the United Kingdom, we have a strong focus on corporate and investment banking based on a full-service offering to corporate and institutional clients. The international nature of SEB's business is reflected in our presence in more than 20 countries worldwide, with around 16,500 employees. At 31 March 2023, the Group's total assets amounted to SEK 3,802bn while assets under management totalled SEK 2,221bn. Read more about SEB at sebgroup.com.