Market Comments - Q3 2023

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Updated on 30.09.2023

After decent increases for global equities in the first two quarters of the year, the third quarter was dominated by higher instability due to new interest-rate increases. Yet, global equities in DKK ended the quarter close to unchanged thanks to a rising US dollar.

We saw rising interest rates in both the US and Europe, and ten-year Danish government bond yields were at the end of the third quarter at their highest level since 2011.
The interest rate increases especially materialised after the Fed at its meeting in September signalled that it expects to maintain its rate at a higher level for a long period of time.
In addition, a considerable increase in oil prices threatens to challenge the otherwise declining trend in inflation and may force the central banks to resort to further interest-rate hikes. Oil price increases seriously gained momentum after Saudi Arabia had decided to cut its oil production up to the end of 2023. Hence, oil prices were up by more than 28% in the third quarter.

The combination of higher interest rates and oil prices is a potentially dangerous cocktail since it puts pressure on consumers’ purchasing power and hence the demand for goods and services which enterprises eventually live on. This may put growth and the strong employment situation under pressure. But the good news is that it is exactly pressure on growth and employment which may make central banks cut their rates again.

Right now
Over Q3, we maintained a balanced risk in our portfolios and as always, we follow the signals from our investment process.
We still focus on whether the higher interest rates will force the economy into a slowdown in economic growth. This scenario will presumably put pressure on the equity markets and may make us point to fewer equities in the portfolios.
On the other hand, the share setback in the past month may also turn out to be an attractive opportunity to buy if the sentiment is assessed to have turned too negative since it has in a historical perspective resulted in good opportunities for positive equity returns for the short term.

Please note
Past performance is not a reliable indicator of future results. The value of and return on your investment may fall, and you may not get back the full amount invested. An initial charge is usually made when you purchase and sell units. The fund may invest in instruments denominated in various currencies. At least 75% of the fund assets will at all times be invested in EUR or hedged to EUR. You should be aware that changes in exchange rates may have an adverse effect on your investment. This may also be the case if EUR is not your base currency.
Information in this text should not be regarded as investment advice, and investors should consult their own investment and tax advisers before buying or selling.