The positive performance in the equity markets continued during March due to stronger than expected economic data. As a result of lower concerns about inflation, the market deems that the interest rate peak has been reached and the central banks are now expected to cut key rates before the summer. The Swedish krona weakened during the month, which contributed positively to the returns on foreign investments and also to emerging market bonds, which performed strongly
The fixed income market had relatively small fluctuations in both long and short-term interest rates during the month.
We expect a widescale decline to inflation and the start to rate cuts by the central banks, which should lead to a soft landing in economic activity. In this environment, corporate profits should also gain momentum and we believe there are favorable conditions for equity markets to continue to rise. Consequently, we increased the proportion of equities further and are retaining an overweight in equities in our portfolios.
Within the equity holdings we prefer high-quality companies, i.e., companies with stable cash flows and strong balance sheets, as well as an overweight in small caps that benefit from lower interest rates and an improving economy. Performance was positive for the holdings in the alternative investments and we remain positive on so-called CAT bonds (bonds linked to natural catastrophes).