Jacob Wallenberg says investors need to get used to the prospect of weak growth even as central banks try to prop up economies with record stimulus.
As equity markets start to retreat from historically high valuations, the chairman of Investor AB is warning that he’s not seeing much actual corporate growth.
“You go through most markets and there’s limited growth and we’re all hoping for further development, but right now, looking at the quarterly reports, you don’t see significant growth,” Wallenberg said in an interview in Stockholm on Tuesday. “You hear a lot about further rationalization, efficiency gains etc. etc. You don’t hear a lot about growth.”
The comments come as investors start to question the sustainability of stock prices that have risen much faster than revenues at many publicly traded companies. Concerns that stocks may be overpriced have spread, with even Federal Reserve Chair Janet Yellen last week warning that equity market valuations are “quite high.”
Wallenberg said that central bank stimulus, such as the European Central Bank’s quantitative easing program, will provide support to economies, but even with those measures the “reality” is that growth will be limited.
Investor AB holds stakes in about one-fifth of the companies on the OMX Stockholm 30 benchmark index, including Ericsson AB, AstraZeneca Plc and SEB AB. It also owns shares in ABB Ltd., which is listed both in Stockholm and Switzerland, Sweden’s Saab AB, Husqvarna AB and Swedish Orphan Biovitrum AB as well as Finland’s Wartsila Oyj. Subsidiaries include Moelnlycke Health Care and Aleris.
Some of Investor AB’s companies have already suffered share-price setbacks after revealing disappointing figures. Ericsson fell 10 percent on April 23, after the world’s largest maker of wireless networks reported first-quarter profitability that missed analysts’ estimates amid a slowdown in spending by North American operators and said the trend is set to continue.
Atlas Copco AB, another Investor-controlled company, fell the most in six years on April 28 after orders for mining equipment and large compressors declined.
“It’s reality,” Wallenberg said. “It’s something you have to deal with.”