The market and the economy in 2014

Seen through Norwegian eyes, 2014 turned out to be an eventful year. The oil price fell by more than 50 per cent. Exports of salmon to Russia halted abruptly, as a tit-for-tat for Western sanctions. The Norwegian krone fell so hard that by yearend one US dollar cost 22 per cent more – or almost 34 per cent more if we factor in the fall recorded the year before.

The situation was no less exciting when it came to interest rates. The Swedish central bank cut its key rate to zero per cent. The European Central Bank reduced its deposit rate to minus 0.2 per cent. And German government bonds, traditionally viewed as a safe harbour, rewarded prudent investors with a return of 14 per cent – in euros. For Norwegian krone-based investors, the reward would have been around 23 per cent.

The situation looks less dramatic in the macroeconomic summary: In real terms, global GDP increased by 3.4 per cent, on a par with the two preceding years. Our domestic GDP growth crept upwards to 2.2 per cent overall and 2.3 per cent for the mainland economy.

The stock market’s summary of the year, a complex opinion poll in which a large number of operators express their views through the capital they own or dispose, was equally sober. Both globally and in Norway, the average investor in equities received a return of the order of five per cent. Stock market pricing has not changed much over the last year.

This should in no way be taken as a signal that the tension has dissipated.