Major Nordic Fund Moves Assets to US as Chaos Mounts in Europe

Whereas Scandinavian economists have been bracing for a hard landing after Trump's rise to power, the Finnish pension fund Ilmarinen, which is one of Scandinavia's biggest asset managers that oversees about $38 billion worth of funds, is moving its resources to the US due to prospects of a US boom.

Ilmarinen plans to offset its underweight in the US through investments in primarily fixed-income products, commodities and real estate, as well as US stocks. The fact that Ilmarinen is drifting away from the Eurozone and putting more emphasis on the US market reflects an overall lack of confidence in Europe, Bloomberg reported.

Of late, European investors have been increasingly high-strung as the EU member states are facing a series of elections that may lead to unpredicted results due to the public dissatisfaction with years of austerity measures aggravated by the migrant crisis. Earlier this week, Italian Prime Minister Matteo Renzi resigned after losing a referendum he himself had called to push through constitutional changes, plunging one of the EU's biggest economies into political limbo. Further "surprises" of this scope threaten to trigger a new wave of political and economic chaos for Europe.

The present situation creates a grim outlook for the European economy, according to Ilmarinen CEO Timo Riitikalo. In contrast, the dollar is expected to further rise in value, provided that US President-elect Donald Trump's plans pay their way. According to Riitikalo, the US may potentially go on a "spending spree" that may put American growth in a turbo mode.

However, this decision may seem a bit erratic considering previous commentaries by Ilmarinen Chief Investment Officer Mikko Mursula. In November, Mursula expressed fear that Trump's victory may become a severe blow to the Finnish economy due to his well-known support of protectionism and his anti-globalist stance. Finland, which for years has been one of the foremost beneficiaries of globalization, may suffer greatly, Mursula told Finnish newspaper Arvopaperi. Murula's fear of US protectionism was shared by Penna Urrila, Chief Economic Policy Adviser at Confederation of Finnish Industries EK.

Meanwhile, the Danish investment manager Formuepleje has also registered a shift towards the US.

"This is due to two factors. One is the so-called Trump effect. The stock market sees opportunities for timely stimuli from Donald Trump. The market, including us, also sees opportunities for improved framework conditions in the US, primarily because of tax cuts," equity strategist Otto Friedrichsen from Formuepleje told Danish newspaper Finans, venturing that the US will provide the greatest earnings growth.

Trump's economic policy implies tax cuts, job creation and increased spending on infrastructure projects. In particular, Trump's electoral program proposed to reduce the maximum income tax rate from the current 39.6 to 33 percent and simplify the progressive scale of taxation, leaving three rates only: 33, 25 and 12 percent. Significant tax relief is also expected to be provided for big businesses: Trump proposed slashing the US corporate tax from 35 to 15 percent.

Earlier, the Organization for Economic Cooperation and Development (OECD) improved its forecast for global GDP growth in 2017 by 0.1 percent from 3.2 to 3.3 percent against the backdrop of Trump's victory.