Oslo Børs
Benchmark index in 2010
World index in 2010 (USD)

The market and the economy in 2010

We often talk of being unable to see the wood for the trees, meaning of course that we are focusing so intently on individual details that we fail to see the bigger picture. The situation in 2010 was the reverse of this – many people were unable to see the trees for the wood. Those who were concerned only with the bigger picture, who focused on bad Western macro news (and there were a lot of them) overlooked the fact that, in reality, much of business and industry was in fact performing far better than had been feared.

Admittedly, the year began with a number of optimistic assessments and upbeat predictions. We started 2010 with clear hopes of an upturn in the wake of the most sweeping stimulus and rescue packages of all time. Stock markets, both home and abroad, rose sharply in the first quarter.

After that there was no end to the bad news. Ash from a volcanic outbreak in Iceland paralysed large parts of European civil aviation. The debt crisis escalated in Greece, Ireland, Portugal, Spain and Italy, with fears that it might spread even further afield. A raft of economists presented dire warnings of belt tightening measures within the OECD that would need to continue for years, to the accompaniment of intense protests and demonstrations against the cost-cutting. In the United States, there was talk of a possible double dip, in other words a new recession hard on the heels of the last recession, while China was increasingly seen as exposed to inflation and a growing housing bubble.

All this was topped off with a serious oil disaster in the Gulf of Mexico, followed by stringent restrictions which also affected Norwegian companies. At the time of writing, provisional figures published by the IMF reveal that the upturn in the developed economies has not after all been as significant as was thought. For most of these nations, including Norway, GDP has not yet climbed back to its 2008 level.

In light of these developments, who would have predicted that the OSEBX would rise by 18 per cent last year? Or that the earnings of companies in the index would increase by no less than 31 per cent? Or that volatility (fluctuations) would be lower than for three years?

This was by no means apparent if developments in the market were analysed exclusively in terms of macro news and key figures. In other words, 2010 provided yet another example of the value of understanding companies, industries and long-term developments rather than timing peaks and troughs in the market.

More on the market and the economy this year.

2010 in a nutshell
OSEBX +18.3%
S&P 500 return +15.06%
MSCI World net (USD) +11.8%
3-month NIBOR from 2.19 to 2.60%
10 year Norwegian Treasury from 4.15 to 3.68%
Share turnover Oslo Børs (value) +18.7%
Brent Blend from USD 78.70 to USD 94.70
USD/NOK from 5.78 to 5.86
EUR/NOK from 8.32 to 7.81
GDP growth global 5.4%
GDP growth Norway 0.6%
GPD growth Mainland Norway 1.8%

Sources: Oslo Børs, Standard & Poor’s, MSCI Barra, Norges Bank, FactSet, IMF, SSB, Pareto. GDP growth is updated with revised estimates after the respective Pareto annual reports were published.