The positive momentum in equity markets continued in August. The MSCI World Index rose by 2.42 %, the US S&P 500 by 2.68 %, the European STOXX Europe 600 by 0.50 %, and Sweden’s OMXS30 gained 1.99 %.
Following a strong earnings season, we are reminded that companies’ long term earnings growth remains the most important driver of value creation in equity markets over time.
The earnings season is drawing to a close and the results have, on the whole, been significantly better than the market had anticipated. For the second quarter of 2026, 97 % of S&P 500 companies have reported their results. Of these, 86 % have beaten earnings expectations, the highest proportion since the second quarter of 2021. At the same time, 77 % have reported higher than expected revenue.
Aggregate earnings growth exceeded 50 % compared with the same quarter last year, an impressive rate of growth. Comments from corporate management teams and analysts’ upward revisions to earnings forecasts reinforced the picture of gradually improving global demand. The earnings season indicates that this year’s stock market gains have primarily been driven by strong order intake and an improved earnings outlook. Earnings improvements were also relatively broad based during the quarter.
Despite strong share price performance, the technology sector is currently trading close to its average valuation range over the past twenty years. This suggests that improvements in corporate earnings have justified the gains, while valuation expansion has been considerably more moderate than during previous market rallies.
As we have noted previously, the economic outlook remains strong, particularly for Sweden. A compilation of 27 companies that report order intake and for which analyst estimates were available shows that aggregate order growth amounted to 33 % year on year in the second quarter, 10 percentage points above expectations. This is the strongest order intake since the second quarter of 2021, although the comparison figures at that time were significantly affected by the abnormally low levels recorded during the pandemic the previous year.
Importantly, demand is being driven by investment across a much broader range of sectors than pure technology companies alone. In August, the National Institute of Economic Research revised its forecast for Swedish GDP growth in 2026 upwards to 2.4 %, followed by an acceleration to 2.8 % in 2027. This represents one of the highest growth rates in the EU and is even slightly above the forecasts for the US economy.
The most closely watched individual earnings report of the month came towards the end of August. Nvidia’s revenue more than doubled compared with the previous year, while its data centre business continued to be the clear growth engine. At the same time, the gross margin remained at a very high level, and guidance for the current quarter came in well above market expectations.
Perhaps the most interesting aspect of the report, however, was the indication that demand continues to exceed supply. This suggests that growth is not primarily constrained by customers’ willingness to invest, but rather by the company’s ability to deliver quickly enough. This supports the view that AI investment remains in an expansionary phase. Some forecasts suggest that Nvidia’s revenue could increase by more than USD 500 billion between 2026 and 2028. This would be roughly equivalent to adding the combined revenues of two of Europe’s largest companies, Shell and Volkswagen, in just two years.
On 29 June, our Swedish equity fund, NE Sweden, was featured on Di TV after ranking first among approximately 100 Swedish equity funds in terms of year to date returns. The segment presented the fund’s investment philosophy, its largest holdings and the long term trends that shape our investment approach. We view this recognition as confirmation of the value of a disciplined and selective approach to investing in quality companies.
As of the end of June 2026, our Nordic fund, NE Strategy, had received the highest possible rating, 5 out of 5, for Consistent Return over 5 years, 10 years and since inception. The fund had also received the highest possible rating, 5 out of 5, for Total Return over 3 years, 5 years and since inception. Total Return and Consistent Return are rating categories within the LSEG Lipper Leaders Rating System and are based on the fund’s historical risk adjusted returns relative to comparable funds. In 2024, the fund was also named Europe’s best Nordic equity fund over five years.
History shows that major technological investment cycles recur periodically. Railways, electricity, the internet and today’s developments in artificial intelligence have all created significant investment opportunities. At the same time, long term returns have primarily been generated by companies that have successfully translated technological advances into sustainable earnings growth, cash flows and increasing market shares.
During the year, we have observed growing interest in funds with a clearly defined investment philosophy, a long track record and a consistent investment process. In an investment environment where interest rates, geopolitics and technological developments continue to influence markets, confidence in the investment management model becomes particularly important.
Our funds remain focused on companies with strong market positions, high profitability and a proven ability to benefit from long term structural trends such as digitalisation, automation, electrification and artificial intelligence. The historically strong order intake recorded across several industrial segments in the second quarter, the successive upward revisions to earnings forecasts and companies’ positive outlooks reinforce our assessment that conditions remain favourable for continued strong long term earnings growth. In an environment where corporate fundamentals are once again taking centre stage, we believe that an active and selective approach to investing in quality companies will remain crucial to generating returns.
