Monday, September 18, 2006
The Swedish election took place and the more conservative party won which sets the stage for lower taxes and the trimming of the extent to which Sweden is a welfare state.
I have disclosed having exposure to Sweden in the past for clients with long term holding Volvo (VOLV) and more recently having added the Swedish krona currency ETF (FXS) as well.
While I have no exposure to iShares Sweden (EWD) I have written about that ETF two times for TheStreet.com (here and here) and I wrote about FXS one time.
This chart shows the extent to which EWD has out performed SPY year to date. While I doubt it is the case for the run up in March and April, the run this summer was due, I believe, in part to the expectation the more business friendly candidate would win the election.
Now that the expected has happened I would not be shocked to see Sweden take a bit of a break. Long time reader, Tom in Indy asked what the down side to Sweden is. This could be one negative. While I have no plans to try to trade around this notion a pause makes sense.
Another thing that makes sense to me is that any change that might come will not transform the country into some sort of libertarian state with no tax and no government. A more realistic expectation would be a few small incremental steps.
One of the reasons I have been inclined to own Sweden is that is that GDP growth is outpacing the Eurozone and Sweden has a much lower unemployment rate. A few months ago when I touched on this point a reader left several links including this one that question the validity of the numbers. I don't think the market believes the numbers are bogus but if you have an interest in Sweden it is worth know that this argument exists.
For now the immediate reaction is that the krona is higher against the euro and the Norwegian krone (this is a popular currency pair), has given up its gain against the US dollar and the stock market is up 0.29%.
Posted by Roger Nusbaum at 5:59 AM