10 years since the financial crisis

August was a mixed month, with US shares at the forefront. As we approach the 10th anniversary of the start of the financial crisis, it is likely that the US remains at the center of attention.

For the month as a whole, the US S&P 500 Index rose by 3.3 per cent measured in USD, while the European Stoxx 600 Index fell by 2.1 per cent measured in EUR and the Nordic VINX Index ended the month up 2.8 per cent measured in NOK.

10 years ago – what now?

On 15 September, it is exactly 10 years since Lehman Brothers went bankrupt. In many ways, that marked the start of the financial crisis, although the unrest started and the markets peaked earlier. The financial crisis led to a deep recession in the global economy, with rising unemployment that had repercussions for many years afterwards. The recovery also took a long time, with lower economic growth than we have seen following earlier recessions. This in itself is an argument in favour of the growth in the USA continuing, although we can see that the USA is now in the late part of the economic cycle and will soon have experienced the longest period ever without an economic setback.

Current macro figures show that the level of activity remains high in the USA, helped by tax cuts and an expansive fiscal policy. The picture has been slightly weaker in the eurozone and Japan, whose macro figures have been disappointing and growth outlooks have been lowered. We can see signs of stabilisation in the eurozone. At the same time, inflation is increasing and the monetary policy is gradually being normalised.

The trade war is escalating

The fact that the US economy is so strong means that Trump can escalate the trade war with China without too noticeable consequences. During the summer, both sides have introduced tariffs on goods worth USD 50 billion. The next stage that has been talked about is an additional increase in the tariffs on imports from China worth USD 200 billion. If this comes about, it will affect almost half of all imports from China, something that China cannot match in size. Discussions are thus ongoing about what other countermeasures China could implement and whether the weakening of the Chinese currency has been deliberate.

Monitoring emerging economies

While the industrialised countries have lost some of their macro momentum, there have gradually been signs of several mini-crises in minor emerging economies such as Turkey, Venezuela and Argentina. Although these are small in a global context, we are monitoring developments carefully.

The road ahead …

The recovery following the financial crisis has been slow, and this in itself may be an argument in favour of the growth continuing. We continue to believe that shares are the best alternative.

"I never once considered that it was appropriate to put taxpayer money on the line in resolving Lehman Brothers"
Henry Paulson