Elections for Swedens‘ Riksdag take place on September 9. The EU Commission has criticized the vote as voter anonymity could be damaged by the fact that party voting lists are laid open. Voting intentions will be revealed when a voter takes the voting list of his chosen party into the voting cabin. Thus, anonymity is restricted to the choice of a specific candidate on the voting list. As a result, and for this first time in Sweden’s history, OSZE election observers have been sent to monitor the voting process.
Fears that Russian or other organizations might try to manipulate the vote and that the right-wing, anti-establishment “Sweden Democrats“ (SD) might do well in the vote have hit the Swedish krona in recent weeks.
We think current political concerns over Sweden are exaggerated. Even should the SD emerge from the election with the largest voter share, its path to administrative power will be blocked by the other parties. Sweden’s next Prime Minister will emerge from the “moderate” parties but this could well boost the chances of a more consequential victory for the SD in 2022.
Purchasing power parity (PPP) calculations indicate the Swedish krona is significantly undervalued against both the US dollar and the Swiss franc. This is clear from the two graphs in the next column. The undervaluation is around 6-7% using either consumer or producer prices to measure PPP.
The weakness of the SEK is exaggerated and thus allows for investment opportunities.
Swedish krona per Swiss franc since 1990
Source: Thomson Reuters / Datastream und eigene Berechnungen
Swedish krona per US dollar since 1990
Source: Thomson Reuters / Datastream und eigene Berechnungen
Contact: Thomas Härter, CIO, Investment Office
Telephone: +41 58 680 60 44
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Independent asset managers in Switzerland are currently facing a difficult market situation. Many assets are proudly valued after the bull market in the current year, while at the same time the geopolitical fragmentation of the world does not make it easy to make the right investment decisions, as the latest edition of the AVI Index shows.
Independent asset managers in Switzerland are unanimous: local banks are threatened by overregulation, the US economy is overestimated on the stock market, and now is a good time to dry up profits.
In Switzerland, consumption remains the mainstay of the economy, while foreign trade is slowing growth. Inflation is close to zero.
Germany has probably overcome the recession and moderate growth of 1.3-1.4% is expected for the coming years. The EU-US trade agreement further improves the outlook.
In the USA, the figures are contradictory and a shutdown is looming.
The SNB and ECB are keeping their key interest rates unchanged at 0% and 2.0-2.4% respectively. Forecasts point to a slight rise in inflation.
The Fed is continuing its cycle of interest rate cuts due to weaker labor market data and probably also political pressure. Further interest rate cuts are expected.
The mood on the global bond markets is calm and yields are barely moving.
The most important stock markets remain close to their highs as market breadth declines. Individual technology stocks are coming under pressure.
The decline of the US dollar has been interrupted, but further weakness could follow in the medium term.
Gold reflects the loss of confidence in the US dollar.
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