Swedbank Economic Outlook: Towards better times

Swedbank expects a Sweden-led domestic recovery powered by rising household consumption and public investment, forecasting GDP growth of 2.6% in 2026 and 2.2% in 2027. Key projections include household purchasing power rising roughly 3% in 2026, unemployment easing to 7.8% by end-2027, housing prices up about 4% in 2027, and an Riksbank policy rate held until September 2027 when it is expected to reach 2%. Risks include looming US tariffs on EU states that could weaken the recovery; fiscal stimulus of SEK 5–10 billion is likely in the spring budget with ~SEK 20 billion scope next year, and higher public investment—notably defence and infrastructure—should support demand.

Analysis

Market structure: Domestic cyclical sectors (defence suppliers, construction/infrastructure, domestic retail) are the direct winners from SEK 20bn+ public investment and a ~3% rise in household purchasing power in 2026; housing-related names will lag because excess apartment supply caps upside (housing +4% in 2027). Pricing power will shift to firms with high local revenue share (Saab, Skanska, construction/materials) while export-oriented or trade-exposed firms face tariff tail-risk that could reduce margins and weigh on SEK.

Risk assessment: Tail risks concentrate in a trade shock (US tariffs + EU retaliation) that could shave >1ppt off growth vs base case within 6–12 months and push EUR/SEK +5–10% and Swedish 2y yields wider by 30–70bp; opposite tail is a faster-than-expected fiscal acceleration that forces the Riksbank to tighten before Sep 2027. Hidden dependencies include mortgage regulation easing (amplifies housing demand) and VAT timing (temporary downward inflation bias). Key catalysts: spring budget (next 60–90 days), NATO/defence contracts (next 6–18 months), and any US tariff announcement (immediate to 90 days).

Trade implications: Favor concentrated long exposure to Swedish domestic cyclicals and short trade-exposed exporters or long-dated duration if tariffs materialise. Use FX to express krona conviction and short-duration Swedish sovereigns as tactical carry if Riksbank stays on hold. Options can asymmetrically express call on defence/infrastructure spending while limiting downside in an abrupt trade shock.

Contrarian angles: Consensus overweights macro tariff fear and underprices domestic fiscal impulse — expect selective 15–30% upside in domestic cyclicals if budgets confirm SEK 20bn+ paths. Conversely, consensus may under-appreciate upside inflation risk if VAT cut reverses and krona weakens, which would re-rate banks and widen yields; therefore hedge duration exposure around policy announcements.

Key Decisions for Investors

• Establish a 2.5% net long position in SAAB-B.ST (Saab B) for a 12–24 month horizon reflecting defence capex; complement with a 12-month 10% OTM call spread (buy 12-month strike +10%, sell +30%) to cap cost. Trim/close if shares rise +30% or new defence commitments fall short of SEK 10bn incremental within next 12 months.
• Buy a 2% position in SKA-B.ST (Skanska B) to play infrastructure; use a 9–15 month calendar with a 0.5–1% portfolio risk via long-dated call options (buy 12-month ATM calls) targeting 15–25% upside by end-2027; stop-loss -12% on outright equity exposure.
• Initiate a 1–1.5% NAV long SEK position vs EUR via a 6–12 month EUR/SEK short forward (or spot) to capture krona appreciation if growth outperforms; enter if EUR/SEK >11.5, target 4–8% krona gain, exit if EUR/SEK falls 4% from entry or a tariffs shock is announced.
• Allocate 2% NAV to Swedish 3–5y government bonds (SGB 3–5y) for 6–12 months to harvest carry and potential 20–40bp yield compression if Riksbank stays on hold; hedge with a 10bp stop-loss sensitivity (exit if yields widen >15–20bp intraday).
• Set a hedged pair trade: Long SAAB-B.ST (2.5%) / Short VOLV-B.ST (Volvo B, 1.5%) to express domestic defence-infra upside vs export/auto tariff sensitivity; rebalance if relative performance diverges by >15% or if US tariffs are formally announced within 90 days.