October 3, 2022

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Investment Manager: Risk appetite, which was extreme, has undergone a major shift

Investment Manager: Risk appetite, which was extreme, has undergone a major shift

The main index on the Oslo Stock Exchange opened with a gain of 0.4 percent on the second trading day of the week. On the other hand, mood quickly worsened to a decline of 0.3 percent.

Around 10.30am, the main indicator was relatively flat.

The price of oil rose after falling below $90 on Monday, and North Sea oil was trading at $92 a barrel on Tuesday morning.

Telenor announced in the morning hours that operations in Asia are being consolidated into a separate unit, and that the company plans to cut costs. It also warned of the difficulty of achieving the profit target this year. Telenor shares rose 1.5 percent on the stock exchange on Tuesday.

This week there are interest rate meetings in a row that are occupying the market. Alexander Miller, chief investment officer at Odin Forvaltning, points out that it is not the rise in interest rates that worries the market now, but how large and frequent increases will be in the future.

The risk appetite, which used to be intense, has undergone a major shift and is now on a completely different level, says Miller.

Director of Investments Alexander Miller at Odin Forvaltning.

Director of Investments Alexander Miller at Odin Forvaltning. (Photo: Per Ståle Bugjerde)

After long periods of low interest rates, central banks around the world have increased lending rates sharply this year in the fight against accelerating inflation.

Low interest rates are a drug the stock market has been using for many years — and it has become addictive, Miller says.

– There have been huge sums pumped into the market, not least through the epidemic that is now disappearing. Interest rates are no longer zero and it is a difficult market shift. It’s like detoxing when you quit, Miller says.

difficult balancing

Monetary policymakers are balancing on a knife edge: if they tighten too much, economies will be pushed into recession, and too little action can lead to a wage and price vortex.

It is a difficult balancing act for banks that have to manage the economy with limited tools. Fighting inflation while keeping unemployment low is a tough challenge. It’s easy to fail and make mistakes, says Miller.

Miller points out that times when stock markets fall a lot and for a long time are associated with recessions.

Big drops in the stock market usually come after central banks have missed a bit. Either by a strong yearning for austerity, or vice versa, by inaction, Miller says.

– The market expects a recession – there will be no surprise. How deep and dangerous this is, Miller says, is the worrying factor that causes major mood swings in the market.

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