An expected economic soft landing, followed by a relatively moderate recovery, will increase the odds that central banks will initiate key rate cuts in 2024. Share valuations and risk appetite levels rose in 2023, making a consolidation or slight downturn reasonable. The result is thus still a mixed bag, with a continued risk of disruptions and surprises. This is why we support a balanced approach, with neutral risk exposure and good risk diversification.
“During the year, financial assets have shown strength. Risk appetite among investors has gradually increased. Bearing risk has generally been profitable. However, the optimal portfolio has been difficult to find, since the market has been disparate and its pitfalls numerous. To cope with new surprises, portfolios with broad exposure and neutral risk level are still what we advocate," says Fredrik Öberg, Chief Investment Officer at SEB's Private Wealth Management & Family Office Division.
It is important to have a portfolio that can withstand events such as new banking sector turmoil, a falling Swedish krona and a sputtering Chinese capital market. These are among the events that have created concern so far this year. It is hard to predict exactly what the future trouble spots may be. We do not know what negative effects may occur after a time lag, triggered by drastically higher interest rates. As a result, our portfolios have a normal weight in equities, with more global than Swedish equities, and we are careful not to unilaterally choose a given type of shares. We also have a normal proportion of corporate bonds − a major contrast to the zero interest rate period, when we had double this weight in the high yield segment. Finally, we have a lower proportion of our assets in alternative investment sub-portfolios, while holding more fixed income investments that offer good current yields and the potential for extra returns if government bond yields start to fall.
This edition of Investment Outlook also includes two theme articles:
• Semiconductors – the backbone of digitisation
• Paradigm shift – from ownership to usership
You will find the full report, and a web video, at www.seb.se/investmentoutlookreport