Lunch seminar with Anna Breman – February 13, 2018

Today KvinnoKapital held a fully booked lunch at the Swedish House of Finance, featuring a very honourable guest, Anna Breman, Chief Economist at Swedbank. Malin Hallén very well organised the event, and Swedbank Robur generously provided the lunch.

Anna started by giving us an overview of her career, followed by questions from the audience. After that, she went through her presentation and talked to us about her macroeconomic views.

The story of 3 crisis

Anna describes three crises that have affected her personally and changed the course of her career.
The first one happened on a Wednesday, the 16th of September 1992 in Mottala. She was at school, and her teacher came in, announcing that the Riksbank had just increased the interest rate to 500%.
“In Sweden, you can talk back to your teacher…. it’s ok,” says Anna. “So I said to my teacher: That’s impossible! but I was wrong.”

Anna chose “National Economi” to study after high school because this episode had awoken an interest. I was a stressful time for the youth in Sweden. “We thought that we might never have a job,” remembers Anna. “The economic climate was very low.”

The second was the dotcom crisis. Anna was in the US in the spring of 2001. The Swedish Krona was at 11 to the US Dollar. It was costly to do a masters in the US, especially compared to an entirely financed education in at the Stockholm School of Economics. So in spite of her urge to leave, she stayed and studied in Sweden, and to do her doctorate.

Initially, Anna had specialised in macroeconomics, but the period didn’t inspire her. It was 2002-2003, the 90s crisis was solved. It was the period of “great moderation”. Academic macro was very boring, and it no longer excited Anna.

She decided to perform her research in behavioural economics instead. It was an area where one could conduct experiments and look at causal effects. She became a visiting PhD at Harvard. “I was pulled in,” she recalls.

The market for new doctoral students was solid at the time in the US, and she accepted a tenure-track position at the University of Arizona. Then Lehman crashed. “The environment in Arizona was very depressing. All the money dedicated to research disappeared.”

So Anna went back home, and back to macro. She joined the Finance Department and worked on economic forecasts for two years. Then in 2013, Anna moved to Swedbank, and in 2015 she was appointed Chief Economist.

Personal thoughts and Q&A

Bring more young women to the macro side

One of the things Anna would like to do is get more young women to be more interested in macroeconomics. Lately, she was standing in line at a store with her daughter and saw many 20-year old girls with Swedbank cards in their hands. She had never met any of them, whereas she had met plenty of 55+-year-old men, who were interested in what she had to say about macroeconomics. “It’s a shame,” she laments.

Risks and optimism

People tend to overweight risks just after a large unexpected event. People may become over-pessimistic. After a prolonged period of calm markets, people tend to become over-confident. Optimism is important for the market, Anna believes.

The media and visibility

Anna believes that it is important to have visibility in the media. Once someone starts answering questions, journalists keep on ringing. When Anna can’t answer all the questions, she also shares with others. “It is good for everyone,” she thinks, even though she finds it difficult to see herself on TV or listen to herself talking on the radio.

The toughest part of the job

For Anna, managing her workload is the most difficult. “One can work around the clock and still not achieve it all,” she says. Her department does all the macro analysis for all client categories within the bank; the team needs to reach all of these clients: private customers, companies, large institutional customers, etc. The team counts economists in 5 countries. They have a strong base-analysis. “We will never be the best in China or Japan, but we should be the best when it comes to Sweden, Nordic countries or even the Baltics.”

It took one year for Anna to figure it out. Now she has a personal assistant to answer emails, and it works. “You have to have help, also at home.” She remembers an anecdote from the US: “A colleague in the US didn’t have a cleaner, and a professor told her: “Why should a qualified person like you, who will become a professor, have to clean on your own?”
Anna’s advice is “Pay for your time, especially if you have children. The relevant question is how can you focus on what is important during your 8-10 hours that are available for you to work every day?” People who talk about working around the clock exasperate Anna. People don’t realise that it comes at a price, which is more than just money.

On having a career plan and the drawbacks of being a woman

For Anna, more important than a plan is flexibility, the ability to bounce back, and being resourceful. When she came back from the US, Anna felt like she had “missed” 3 years in her career. To catch up, she started networking, having lunch with people. “You must be interested in meeting people, that’s important.”

Sometimes, Anna believes being a woman can help in a career, as people think that having a woman when there are so many men is a positive. But many times, attitudes can still be very irritating. At an event, Anna mentions, where she served as a “warm-up” to Apple’s Steve Wozniak, she says she received a comment saying that her performance was “unexpectedly positive”. The tone of the email was especially eye-brow raising.

Sometimes it’s good to notice and confront people, but sometimes it’s not worth it. “Choose the people that are good, ignore the others,” she advises.

Macroeconomic forecasts & themes

At Swedbank, the macro team makes 2-year forecasts, which are driven by the market. The analysis is most important for the bond market. The economic cycle goes up and down, and in the background, there is a long-term trend. The best analysis looks at both.

Anna tells another cute story: On the 28th of October 1820, at Drottninggatan 32 in Gothenburg, people were queuing in front of a bank. A little girl called Carolina Hammardag was the first one to go in and put 12-shilling banko Riksdaler (the equivalent of 2 öre) in account number 1. How much would it be today? Much less than you think… only 33 Kronor.

Anna shows us the long-term evolution of the Swedish economy: from agriculture to industrial production, to the service economy. These are all structural changes. A new focus now will be sustainability. She shows the Sustainable Development Goals and Agenda 2030 and talks briefly about a new index.

Her macroeconomic outlook, in general, is positive. All the large economies are growing. Europe and the Baltics are doing better, and are in a positive spiral. In the US, she is very worried on the political side, but economically, the country looks alright in the short-term. The economic climate is the best we have seen in the past ten years.

Central banks are on their way out from QE, and going through a slow and careful normalisation. The ECB will also exit QE at the end of the year, at least out of negative interest rates to zero.

The fact that the US stock market has taken a beating at the beginning of the year isn’t of much concern for the economy. The ownership of stocks in the US is very concentrated within a small group of wealthy people. The situation was very different when the crisis hit the housing market.

Swedbank’s forecasts depending on a downward movement of the US stock market are the following: -5 to -10 %: no effect / -30%: recession.

Anna expresses her admiration for exiting Fed Chairwoman Janet Yellen. She managed to terminate QE and to increase interest rates five times without shaking up the market. Now Powell doesn’t have the same experience as she did. He’s a lawyer…

Politics is what swings the market right now, especially Trump and Brexit. Swedbank forecasts a mild recession in 2020, but Anna admits that it can be hard to predict the timing of a recession precisely. Timing becomes clearer when imbalances can be observed. This time, it’s different: the housing market is not as stretched, but who knows what will cause the next crisis.

Brexit is more of a worry than the US situation right now. The process is very complicated, and many politicians are unrealistic. There is also a risk of contamination if the UK economy suffers too much.

Generally speaking, asset prices are high, and even if the economic outlook is positive, mild corrections cannot be excluded.

The Swedish housing market

Anna tells us about a very in-depth analysis her team has performed on the subject of the Swedish housing market. The document contains about 140 graphs… she will present some of the most important conclusions.

With new production comes a strong offer. This combined with the change in amortisation requirements means that the markets are likely to continue on their correction trajectory at least in Stockholm and in Gothenburg, even if there may be a short-term break in the trend.

In the rest of the country, Anna is not worried. The job market is robust, as is the demand in the economy. The government has budged SEK 40 billion to support the economically weaker groups, such as the elderly and the students.

What about the interest rates? Inflation has now reached 2%. This was the target the Riksbank was waiting for to increase interest rates. That said, there is still a question mark due to a mismatch in expectations. The Riksbank has two meetings, one in June and one in September. Most economists in the street have inflation forecasts under those of the Riksbank for July, as last year as so strong that month, so the year-on-year comparison will be difficult. Hence if there is no increase in June, there might be none in September either. Anna wishes for a ten bps increase in June. She thinks this would be reasonably cautious and slow. A too rapid rise could generate unwanted appreciation in the Swedish Krona.


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