Author: angela@liv.fo

A Peaceful August with Small, Positive Returns

In August, market movements were very small — both in the stock, bond, and currency markets, as well as in commodity prices. In the bond markets, yield curves became even steeper, meaning the difference between short-term and long-term interest rates increased.
Short-term rates remained stable, while long-term rates rose slightly. This led to a slight increase in the value of short-term bonds, while long-term bonds saw small negative returns in August. We’ve seen the same trend for much of the year, and as a result, short-term bonds have yielded a return of 1.8% over the past year, while long-term bonds have produced a negative return of -1.3% over the same period.

When it comes to riskier bonds, investors continued buying both high-yield bonds and corporate bonds in August, which are currently trading at historically low spreads compared to government bonds. This provided good returns — especially high-yield bonds, which returned 1.3% in August and 6.9% over the past year.

Global stocks returned 0.2% in August, bringing their return over the past year to 1.2%. Stocks from emerging markets — especially in China and Brazil — increased more than 10%. Danish, and particularly Nordic, stocks also performed well last month, but the Danish market has dropped more than 4% since New Year’s — mainly due to Novo’s decline.

The dollar remained stable, and prices for gold and silver continued to rise, while pressure on the oil price persists.

Why? Satisfactory Macroeconomic Data, a Dovish Fed, and Political Uncertainty

Long-term interest rates have risen in recent months, even as more and more central banks are cutting short-term rates. This is unusual, though it has happened before.

There are three main reasons for this:

Many countries have financial difficulties and are currently selling large amounts of government bonds. This is the case in the USA, but also in the UK and France, where political uncertainty is also a factor. Investors are unsure whether politicians will get control over debt and large deficits, and are therefore demanding higher interest rates as a kind of risk premium.

Another reason is uncertainty surrounding the US Federal Reserve — and its independence. President Trump wants to appoint people to the Fed board who support his desire for lower interest rates. This increases the risk of monetary policy becoming too loose, leading to excessive inflation — which has also increased demand for both gold and silver. Prices are hitting new records daily.

In early September, the pressure on long-term rates eased a bit, because there are signs of a sudden slowdown in the US labor market. Almost no new jobs are being created at the moment, and unemployment is rising. This gives the Fed an opportunity to cut interest rates multiple times in the coming months — a possibility that both Fed Chair Jay Powell and several board members have mentioned.

However, the weak labor market data in the US has so far had little impact on investors. That’s evident because stock and high-risk bond prices still appear optimistic. Investors seem to believe that the US economy won’t grind to a sudden halt, but is instead in a balanced state where companies can still earn well, while inflation remains low. Good earnings reports from listed companies reinforce this perception.

On the other hand, skeptics argue that the labor market signals in the US are classic signs of an upcoming recession — a recession that could also drag the rest of the world into an economic downturn, with falling profits, declining stock prices, and falling interest rates — which would then push bond prices higher.

The conclusion is, as long as investors believe in a soft economic landing as the macroeconomic scenario, the outlook is good for both stocks and bonds. But rising inflation or declining growth could change that.

Today is a special day at LÍV.

This morning we had a cozy gathering with Silja, Dánjal, Sunneva, and Óli.

Our lovely and talented apprentices, Silja and Dánjal, have now completed their training.

LÍV warmly congratulates Silja and Dánjal on completing their apprenticeships. We are delighted that Silja will continue with us, and at the same time, we wish Dánjal the very best in his future endeavors.

In addition to this, two of our employees are celebrating work anniversaries.

Sunneva has worked at LÍV for 40 years, and Óli has worked at LÍV for 10 years.

We are fortunate and grateful to have such dedicated employees.

We sincerely congratulate them on their work anniversaries and look forward to many more good years together.

Stock Market Growth Does Not Reach the Nordic Countries and Denmark – Interest Rates Remain Stable

The growth in stocks that began in mid-April continued last month, and a strengthened US dollar further boosted returns, resulting in a total return of 4.0% on global equities in July. This also means that the year-to-date return on global stocks has just edged into positive territory. Cyclical or economically sensitive stocks saw the largest gains, while defensive stocks did not rise much.

Once again, stock market growth did not reach Nordic and Danish equities, which in July had returns of -4.9% and -2.4%, respectively. A notable drop in shares of Novo Nordisk had a particular impact. From the beginning of the year to the end of July, Danish and Nordic equities have declined by about 4%.

Interest rates continued to fluctuate up and down in July, and the return on Danish government bonds was close to zero as a result. There was renewed interest in high-yield and riskier corporate bonds – over the past year, these have returned between 0.6–1.1% and 2.4–5.5%.

After several months of decline, the US dollar strengthened in July, which contributed to halting the growth in several commodities such as gold.

Why? Strong Earnings Reports and Optimism About Growth and Inflation

The strong returns are primarily due to investors around the world now believing that the global economy will experience a “soft landing” in the second half of 2025 – the so-called “Goldilocks” scenario. This refers to a situation where both growth and inflation are moderately low, so inflation and interest rates remain stable while growth is still strong enough for companies to increase their profits.

At present, most investors do not believe that Trump’s trade policies will significantly increase inflation in the US. The coming months will show whether this optimism holds. Strong earnings results in the second quarter – especially among American companies and particularly the large tech firms – have also contributed, although the US Federal Reserve’s decision not to cut interest rates had the opposite effect.

However, profit growth in several sectors has been quite low, which may indicate some growth challenges – both globally and in the US. Lower-than-expected inflation figures, on the other hand, have led many to expect that the US Federal Reserve (Fed) will cut interest rates next year, which has further boosted optimism in the stock market.

Conclusion, as long as investors continue to believe in a softer global economic outlook, the trend remains positive for both equities and bonds. However, rising inflation or lower growth could impact the current positive trend.

On July 21, we will be leaving our current premises at Kopargøta 1, where we have been located for many good years. It is with mixed emotions, both gratitude and excitement, that we move on to a new chapter.
We will be closed for summer holidays from monday, july 21 to friday, august 1

We will open on August 4 in our new premises at Óðinshædd 11.
You will find us on the 3rd floor of Óðinsbrú.

We look forward to continuing to provide you with excellent service in our new and modern facilities.

Today, the insurance company LÍV is announcing the new name and logo of the new building at Óðinshædd. Earlier this year, the company launched a naming and branding contest. After reviewing well over a hundred suggestions, the judging panel has now reached agreement on a new name and logo.

52 people participated in the competition, and over a hundred suggestions were submitted. Norse mythology — especially the god Óðinn — was a recurring theme among many of the proposals.

We are overwhelmed by the great interest and want to thank everyone who took the time to send us their suggestions,” says Angela Lindenskov á Bøgarði, marketing coordinator at LÍV.

The Name

Although many of the name suggestions were good, none were quite precise enough. The judges had the authority to choose from the pool as they pleased — but they also had the option to select none. Nevertheless, they were inspired by the many great proposals, and from that, a new name emerged.

“The name is Óðinsbrú, and it fits well with the location. ‘Brú’ is, of course, an old form of the word for ‘bridge’, and the building stands tall on the hilltop, where it somewhat resembles a ship’s bridge. One can imagine Óðinn standing at the helm, gazing out over Nólsoyarfjørður,” Angela explains.

The Logo

While no name was directly chosen from the submissions, the logo competition had a different outcome. Among all the elegant logo ideas, one stood out immediately. In its striking simplicity, the logo felt modern, while the classical color scheme gave it a sense of dignity.

“As seen in the image, the line above the ‘O’ doesn’t slant but is horizontal. This breaks orthographic rules but opens up new interpretations. While a slanted line suggests tension, a horizontal one symbolizes balance, precision, and security — perfectly reflecting the purpose of the building, where Norðoya Sparikassi and we at LÍV will soon be located,” Angela notes.

Henry á Fríðriksmørk won the logo competition and says the following about the design:

“Viewed purely as shapes, the logo is simply a circle and a line. Some might think of binary data (zeros and ones), others may see a golden crown and think of money. Perhaps someone even sees a hint of something sacred — like a halo or a royal crown. I wanted the logo to be open to interpretation.”

The logo will become part of the visual identity of the new building, which will be named Óðinsbrú. And it must be said, the name and logo complement each other well, as together they represent leadership, vision, and security — the very key values of LÍV and Norðoya Sparikassi, who work with life insurance and manage others’ finances.

“We’ve already grown used to the new name and logo, so now we’re just looking forward to moving in on August 4,” concludes Angela Lindenskov á Bøgarði, marketing coordinator at LÍV.

A Good May for the Stock Market

After a strong performance in mid-April, the growth in equities continued in May. Global stocks delivered a solid return of 5.8% for the month, which reduced the annual decline to -3.9%. And now, in early June, global equities are nearly back to the same level as at the beginning of the year. Technology and industrial stocks, in particular, performed well in May. Stocks that are typically less affected by economic cycles delivered more moderate returns. The growth in equities was observed in many parts of the world, especially in the USA, which for the first time this year showed the highest growth. Danish, Nordic, and European stocks, however, have performed the best so far this year.

Interest rates rose in May. As a result, the return on short-term bonds was close to zero, while long-term bonds experienced negative returns. The strong performance in the stock market also had a positive effect on corporate bonds and high-yield bonds, which rose between 0.5% and 1.2% over the month.

The US dollar has weakened significantly this year but changed little in May. Prices for several commodities, especially metals, increased after being low in April. Despite higher supply, the oil price also rose slightly.

Why the Improvement? Delayed Trade Measures, New Fiscal Policy, and AI Growth

In recent months — especially in April, May, and early June — investors have become more optimistic about the prospects for economic growth. This optimism has strengthened both stocks and corporate bonds, although it has also pushed interest rates slightly higher.

The new optimism comes from several developments. US President Donald Trump delayed plans to impose very high tariffs on imported goods for 90 days. Additionally, US courts have overturned the highest tariff rates that were implemented by presidential order. This has boosted confidence that the trade conflict between the US and especially China and the EU may not be as severe as many feared.

Furthermore, strong earnings reports from tech giant Nvidia have reinforced hopes that investment in artificial intelligence will continue at a strong pace.

Adding to this, the Trump administration has reversed course on fiscal policy and is now pursuing expansionary measures instead of trying to reduce the large federal deficit. There are also clear signs of a more flexible monetary and fiscal policy in both Asia and Europe.

What Now? The Good, the Rather Bad, and the Ugly Scenarios

As mentioned in last month’s market analysis, it is possible — to a large extent — to divide forecasts from international financial institutions into three different global economic scenarios for the next 3–12 months:

The Good Scenario:
The worst of the trade war is behind us, and in the coming days and weeks, a rapid de-escalation will occur. Trade agreements will gradually be reached between the US and its partners, and the high tariffs that have harmed global trade will be reduced.

The global economy begins to grow again after a brief downturn due to trade uncertainty. Corporate profits rise again, and default rates on bonds remain low. As tariffs fall, inflation drops accordingly and approaches the targets of both the Fed and the ECB (around 2%). This allows interest rates to remain stable or even decline.

If the good scenario becomes reality, we can expect new highs in the stock markets and good returns — both in corporate bonds and traditional bonds.

The Rather Bad Scenario:
Another group of investors believes a longer period of uncertainty lies ahead, with no clear direction for the equity and bond markets over the next year.

These investors expect it will take many months to reach agreements between the US, China, and the EU. On the one hand, companies and investors may become hopeful about the negotiations themselves, but on the other hand, the uncertainty about their duration and outcome could dampen growth, earnings, and investment for several quarters. This would also limit the US Federal Reserve’s ability to cut interest rates.

The Ugly Scenario:
The third group — the most pessimistic investors and financial institutions — believe we are already in what is called a “bear market,” where major declines in stock prices are to be expected. In a typical bear market, declines are moderate; but in a structural bear market, like during the 2008 financial crisis or the dot-com bubble in 2000, losses can be as steep as 50%.

Such downturns usually last between 1½ and 4 years, and it can take anywhere from 5 to 20 years to recover the losses.

The pessimists believe the US might succeed in securing a few minor trade agreements, but that major deals with China and the EU will take longer — or might not happen at all. This would lead to economic stagnation and push the global economy into a worldwide recession.

This would mean major write-downs in asset values, more bankruptcies, higher unemployment, and rising inflation — a situation that makes it very difficult for central banks to ease the economic crisis.