The Mother of All Recessions May be Coming


Stockholm (HedgeNordic) – The mother of all recessions may be on the way to Sweden, according to hedge fund manager Fredrik Carlsson, as Riksbank’s embrace of negative real interest rates created a breeding ground for excessive risk-taking that transitioned into Sweden’s inflated real estate sector. “There is already a crisis in the real estate sector,” Carlsson tells

“There is already a crisis in the real estate sector.”

“Real estate companies have not been able to issue bonds for several months, and interest rates are very high relative to the return on the properties,” explains Carlsson, who co-founded Carlsson Noren Asset Management’s macro fixed-income hedge fund with Martin Norén back in 2008. “The share prices of some companies are down over 70 percent. The situation is not sustainable, and it will become clearer in the future when loans fall due,” he tells “Real estate companies are already acting by selling off assets and pausing investments. Personally, I think that several heavily mortgaged real estate companies will have to resort to new equity issues.”

“There is nothing wrong with the assets, but with the mortgages in the real estate companies,” explains Carlsson. He views the lingering crisis in the real estate sector as a clear sign that Sweden may be heading for a recession. “The market is worried about inflation and rising interest rates, and it will not resolve itself quickly.” Higher interest rates are also problematic for Sweden’s property market and broader economy because of the high Swedish household indebtedness, as an acceleration of the rate-hiking programme could cause house prices to fall sharply and trigger a more serious recession due to lower consumption.

Higher prices for energy, fuel and food, which are all undermining households’ purchasing power, combined with higher mortgage rates, will lead to weaker consumption. “The market is pricing in a mortgage rate of over four percent next autumn. This hits household consumption very hard,” says Fredrik Carlsson, after mortgage rates have hovered around one percent in recent years. “It is clear that households will need to restrain their spending, which will affect the economy as a whole,” explains Carlsson. “We see news of layoffs at companies, we have a latent financing crisis in the real estate sector and several companies that are slowing down the pace of expansion. These are clear signs of a recession.”

“The market is pricing in a mortgage rate of over four percent next autumn. This hits household consumption very hard. It is clear that households will need to restrain their spending, which will affect the economy as a whole.”

Carlsson argues that Riskbank bears a lot of responsibility for the current situation, saying “that a country like Sweden with a variable exchange rate has succeeded with the feat of lowering interest rates in a boom and raising rates in a recession is a clear failure of the system.” The co-founder of Carlsson Noren Asset Management expects the Riskbank to continue on the same path of raising interest rates, though mortgages rates may be protected as the Riksbank is likely to continue buying mortgage bonds.


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Eugeniu Guzun
Eugeniu Guzun
Eugeniu Guzun serves as a data analyst responsible for maintaining and gatekeeping the Nordic Hedge Index, and as a journalist covering the Nordic hedge fund industry for HedgeNordic. Eugeniu completed his Master’s degree at the Stockholm School of Economics in 2018. Write to Eugeniu Guzun at

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