Autumn hunting season is on

For the month as a whole, the American S&P 500 Index rose 0.6 per cent measured in USD, while the European Stoxx 600 Index climbed 0.3 per cent measured in EUR and the Nordic VINX Index ended the month down 1.9 per cent measured in NOK. Here in Norway, the oil-lubricated stock exchange (OSEBX) increased by 3.5 per cent.

The oil price is rising

Despite slightly lower global growth expectations, the oil price rose to more than USD 80 per barrel in September and a price of USD 85 was noted a few days into October. The combination of high demand and a potential supply-side reduction linked to Iran, OPEC and Venezuela explains the increase in the short term. For global growth and energy-dependent countries, the higher oil price is negative. For oil producers and the industry around them, the price rise is a long-awaited one. For active managers such as Delphi, the higher oil price provides investment opportunities we have not seen for a while.

Interest rates are being "normalised"

In September, the US central bank (Federal Reserve) increased the interest rate for the third time this year. That means the interest rate has been raised eight times since the "normalisation process" started in 2015. Good growth in the USA, accompanied by high demand and a tight labour market, is helping to lift both pay growth and inflation. This paves the way for another interest-rate hike in December, and an additional three such hikes are expected in 2019. At the same time, the Federal Reserve is gradually reducing the balance sheet as part of the "normalisation process". The interest-rate rise in the USA will in time clear the way for rises in Europe too. In Norway, this has already started.

The trade war rolls on

The USA introduced tariffs on goods worth an additional USD 200 billion in September. The tariff rate of 10 per cent was lower than feared, but it has been announced that it will be increased to 25 per cent if negotiations do not progress. The USA also indicated it would immediately go to phase three and introduce tariffs on goods worth another USD 267 billion if China introduced counter-measures. As expected, China did introduce counter-measures and increased tariffs on goods worth a further USD 60 billion. However, China also reduced its tariff rates on some of its foreign trade. We can also add that the USA has now reached a "new" North American Free Trade Agreement (NAFTA) with Canada.

The road ahead ...

Stock market returns come in fits and starts. A steadily rising oil price now offers opportunities in a number of sectors. The stock markets' autumn hunting season may be an exciting one.

"Predicting oil prices is anyone's guess"
Søren Skou