The market and the economy in 2017
In retrospect, 2017 seemed almost like a Kinder Surprise Egg: the oil price continued to rise, following a substantial increase on the low point reached in 2016. Market rates of interest remained more or less static in the wake of a modest rise before the year started and three increases in the US key rate. And stock markets worldwide surged, in some countries topping 20 per cent.
Furthermore, the upturn was remarkably even. Whereas the preceding year had started with a major downturn, 2017 was mercifully free of substantial corrections. By the end of the year, the MSCI World index had been climbing continuously for 14 months. This had not been seen since the launch of the index on New Year’s Eve 1969.
Economic growth now also picked up globally. For the first time for many years we saw concurrent revivals in all the major economic areas of the world. But why was this happening now, after so many years of stimulatory measures in the wake of the financial crisis? And why had the stock market had so many prosperous and relatively stable years in the interim?
In fact, there is a logical connection here.
2017 in a nutshell
|S&P 500 return||+21.8%|
|MSCI World net (USD)||+22.4%|
|3-month NIBOR||from 1.17 to 0.81%|
|3-month STIBOR||from -0.59 to -0.47%|
|10-year Norwegian Treasury||from 1.70 to 1.65%|
|10-year Swedish Treasury||from 0.55 to 0.78%|
|10-year US Treasury||from 2.44 to 2.41%|
|Brent Blend||from USD 56.82 to USD 66.87|
|USD/NOK||from 8.62 to 8.21|
|EUR/NOK||from 9.09 to 9.84|
|GDP growth, global||3.7%|
|GDP growth, Norway||1.8%|
|GDP growth, Sweden||2.4%|
|GDP growth, Mainland Norway||1.8%|
Sources: Oslo Børs, S&P Dow Jones Indices, MSCI, Norges Bank, FactSet, IMF, Statistics Norway, SCB, Riksbanken, Pareto.