The view

Investment Environment
Digitalisation offers the opportunity to collapse existing value chains and enable brand owners to reach out to consumers directly. As this happens within multiple industries, the winners are almost always the consumers and brand owners, with suffering intermediaries and a few prosperous new entrants. As this happens on the political scene, political messaging has been reduced to one liners fitting social media platforms. The most widely cited one liner of the fourth quarter was President Trump’s retaliatory remarks to North Korea’s Kim-Jong Un, which included the words ‘Fire and fury’. The simplified rhetoric masks the more complex situation on the Korean peninsula which escalated over the quarter with North Korea testing its nuclear capabilities in a manner which was unexpected to the United States. However, one of the most volatile situations in the world took a possibly positive turn when North Korea reached out to South Korea for participation in the 2018 Olympic games, whilst discussing their relationship. The unexpected turn sidelines the United States as a peace maker and may be a potentially positive game changer for the region. It is currently too early to tell, although it is unexpectedly promising from a global perspective. ‘Fire and fury’ also became the ‘tell-all’ inside story of the Trump administration again causing the President’s fitness for office to be questioned. The US tax legislation, passed under much media attention, will come into effect during 2018 with some anomalies playing out early on in the year. The changes are generally perceived not to be the overhaul that was advertised, but nevertheless positive for investors, although not always for citizens.

As France’s President Macron is regaining popularity, Angela Merkel struggled for longer than expected to form a coalition in Germany. The far right is gaining grounds in Austria and Theresa May is losing credibility in England. Spain is successfully balancing the Catalonian secessionist movement and Italy is up for election this year with a wild field likely to include the octogenarian Silvio Berlusconi. The European political landscape is far from providing a forceful execution environment at the moment and President Macron may very well be provided with an increasing European platform.

The global economy is doing well with few identified economic bubbles of real concern, whilst the risks are still perceived to be more political than economic at this time.

Scope outlook
The Swedish economy retains its positive momentum into election year. The imposed requirements for amortization cooled the housing market and some developers experienced a significantly changed environment. However, the effect on consumption is yet to be seen. The Norwegian economy continues to follow the oil price development and although trending up movements, are quite volatile. The Finnish economy is also improving with a clear link to the country’s dependence on commodity industries. The less commodity dependent economy of Denmark continues a stable improvement. Overall the Nordic economies continue to outperform in an international context. Inflation expectations are gradually coming back and longer interest rates have hence gradually increased. In such an environment, many asset classes will be hurt, but fundamental revenue growth, the core of Scope’s investment strategy, will become an even more attractive investment strategy.