Sweden Defeated The Coronavirus Without A Lockdown – Now Its Companies Are Reaping The Benefits

Progressive critics of the Trump Administration’s response to the coronavirus pandemic like to point to Sweden and portray the Nordic country’s decision to forego lockdowns as a travesty motivated by greed. Such reductive, black-and-white interpretations are inevitably the result of a childlike analysis where every hero needs to have a hero and a villain. But although Sweden’s COVID-19 czar has admitted that he would have changed certain elements of the country’s response if he could go back in time, the country’s decision to skip lockdowns, and keep the country relatively open, has paid off – even if Sweden does have a significantly higher mortality rate than its neighbors (though still lower than all of the worst-hit western European countries).

Sweden’s death-to-infection ratio is relatively high, a reflection of a series of early outbreaks in managed-care homes that led to widespread fatalities among their elderly and vulnerable residents.

Here’s how Sweden compares to the US, Brazil, the UK, and a handful of other countries.

And as the US remains engulfed in an election-year debate about how to handle the crisis, and whether mandatory social distancing orders (like mask-wearing mandates) and, if necessary, more lockdowns should be used to fight the outbreak – views differ widely across people of different political orientations. Even Dr. Fauci, who has said some of the worst-hit areas should “think about” imposing stay at home orders if things get worse, has worded his views very carefully so as not to sound like an imperative. But as Q2 earnings season enters one of its most consequential weeks in the US, the FT pointed out in a piece published earlier that Sweden’s biggest companies have beaten analysts’ expectations across the board.

It was supposed to be a terrible start to the summer. As a debate rages in Sweden over whether its lighter-touch approach to managing coronavirus has been the correct course, most European analysts were braced for dreadful quarterly earnings from the Scandinavian country during the height of the pandemic.

But every day for the past two weeks, Swedish company after Swedish company has beaten expectations. From telecoms equipment maker Ericsson to consumer appliances manufacturer Electrolux via lender Handelsbanken and lockmaker Assa Abloy, Swedish companies have delivered profits well above what the market was expecting, even if in some cases that merely meant a less precipitous decline than analysts had feared.

“I have never seen such a high proportion of companies coming in with better profits than expected. It’s almost every company,” said Esbjorn Lundevall, chief equity strategist at lender SEB. The bumper crop begs the question of how many of the positive surprises are due to Sweden’s more controversial approach to managing coronavirus. Unlike the rest of Europe and North America, the country did not have a lockdown and kept schools and many shops and businesses open – a public health experiment that has attracted global scrutiny and drawn both praise and censure. “Keeping society open, schools open, doesn’t mean that we haven’t been hit. But it does mean that we haven’t suddenly not been able to leave our homes. That has undoubtedly helped companies,” Alrik Danielson, chief executive of Swedish bearings manufacturer SKF, told the FT.

The earnings have pressed some economists to reconsider their GDP projections for the country.

To be sure, while all boats appear to be rising in Sweden’s COVID-19 resistant economy, bolstered by what experts described as a “psychological” disposition among Swedes not to fear things like going to work, or school, or to a restaurant, some industries have benefited more than others.

There’s a split, analysts say, between companies between domestically focused Swedish companies (ex.retail banks) while the country’s manufacturers like Volvo are struggling with higher levels of “uncertainty” due to the global outlook.

Sweden’s economy has performed so well for a handful of reasons. One is its close economic relationship with both China and the US. China’s economy had already slowed to its weakest pace of growth in 29 years when SARS-CoV-2 came bursting out of Wuhan late last year. But thanks to Beijing’s heavy-handed response to the outbreak, the mainland economy has already returned to growth.

That’s good news for Sweden, which exports many heavy and industrial goods, as well as foodstuffs and other products to China, among other things.

The bigger worry, the FT points out, is Europe, especially as more clusters emerge in Spain, Belgium and elsewhere.

All industrial groups have been helped by signs of recovery in China and a robust early rebound in much of Europe, as well as large government support packages to maintain jobs.

The big worry for them now is about whether a second wave of coronavirus hits Europe and the US in the autumn.

“What is the likelihood that you get more lockdowns? What is the likelihood that this fear factor subsides?” asked Mr Danielson. “That is going to be the big question of how quick the recovery will be. Now it’s about psychology, it’s about people.”

He is not alone in thinking that Sweden has a subtle psychological advantage by dint of having stayed more open and having people less scared of working, shopping and socialising outside the home.

Whatever happens in western Europe, Sweden’s outlook has improved dramatically over the last month. New cases have grown rare…

…and deaths are even rarer.