The market focused on strong corporate reporting during April, overshadowing concerns about persistent inflation and interest rate hikes. Despite the uncertain global environment, many companies continued to show strong growth, resulting in positive performance for almost all of our funds.
Summary of market focus during the month:
- Strong corporate reporting Among the companies that delivered positive surprises were industrial companies Volvo, Scania, and Atlas Copco. The Nordic banks SEB, Nordea, Handelsbanken, Swedbank, DNB, and Danske Bank reported strongly, with high net interest income and low credit losses, surpassing expectations by a wide margin.
- Bank crisis concerns subside Bank crisis concerns diminished after last month’s bank collapses, which are increasingly seen as isolated incidents. With the “fear index” VIX at its lowest level since the end of 2021, a banking crisis appears unlikely.
- Continued high inflation and further interest rate hikes In Sweden, retail statistics showed a continued decline, indicating that higher interest rates are now significantly affecting households’ wallets. Although inflation remains high in absolute terms, the trend is downward, which is also observed in many other countries. In April, the Swedish central bank (Riksbanken) raised the benchmark interest rate again, this time by 50 basis points to 3.50 percent.
Performance of fixed income funds
The ongoing reporting season has shown that many companies have continued to perform strongly. However, it is evident that there is significant uncertainty about the future, and reactions in both the stock and credit markets have been significant in many cases. Industrial companies Volvo, Scania, and Atlas Copco, as well as the Nordic banks, delivered positive surprises. Real estate companies have generally reported good performance in their operational activities, driven in part by higher rents. However, higher interest rates and credit spreads have weighed on results, leading to lower interest coverage ratios. Most companies have also continued to write down the value of their properties, resulting in higher loan-to-value ratios. On the positive side, many companies have actively managed their balance sheets through property divestments and repurchases of outstanding bonds. Credit management company Intrum disappointed the market again by reporting lower earnings, leading to a drop in the price of the company’s bonds.
All of our funds performed well. Simplicity Global Corporate Bond had the highest increase, rising by 0.90%. However, the performance was volatile, reflecting the uncertainty prevailing in the international market. Simplicity Likviditet, Simplicity Företagsobligationer, and Simplicity High Yield rose by 0.48%, 0.81%, and 0.72%, respectively.
During the month, we launched a new fund, Simplicity Nordic Corporate Bond, which is a euro-hedged version of Simplicity Företagsobligationer. Please feel free to contact us if you would like more information about this fund.
Equity fund performance
Strong reporting from industrial companies Volvo and Atlas Copco. The backlog of orders has been cleared as various component shortages have been resolved. Volvo delivered a record quarter with higher deliveries and order intake than expected, while demand remains strong. ABB doubled its sales growth target to 10%.
All Nordic banks (SEB, Nordea, Handelsbanken, Swedbank, DNB, and Danske Bank) reported strongly, contributing to a good month for Simplicity Norden and Simplicity Sverige. High net interest income and low credit losses were among the factors that exceeded expectations by a wide margin.
The holdings of Simplicity Fastigheter mostly showed positive performance. Atrium Ljungberg was an early reporter and the stock rose by double digits as the company impressed with stable finances, good cost control, and net operating margin.
Reverse profit warnings from AAK, Biogaia, Kempower, and Novo Nordisk boosted their stocks and benefited Simplicity Norden, Simplicity Sverige, Simplicity Småbolag Sverige, and Simplicity Green Impact.
Building-related companies had a positive impact on Simplicity Småbolag Global, especially Simpson Manufacturing, which rose on strong earnings. Companies in the semiconductor industry broadly declined during the month, resulting in declines for Cirrus Logic, Melexis, Fabrinet, and Sanmina in Simplicity Småbolag Global. Although concerns about bank crises diminished during the month, regional banks in the USA were devalued, weighing on Simplicity Småbolag Global. Several of the fund’s banking holdings, however, released stable reports in April.
Fund performance: Simplicity Norden rose by 3.4%, Simplicity Sverige by 2.7%, and Simplicity Fastigheter by 3.2%. Simplicity Småbolag Sverige declined by -1.1%, Simplicity Småbolag Global decreased by -2.6%, and Simplicity Green Impact fell by -3.4%.Tillbaka till Nyheter