Will Sweden Swing to the Right?

Sweden goes to the polls this weekend in a general election, expect another populist uprising. For decades, Sweden has been highlighted by many as a shining example of utopian society. High taxes, but above-average educational and very generous welfare systems combined with a low crime rate, have made Sweden the envy of the world.

However, societal frictions have been rising, and many Swedes appear to be especially disgruntled with the country's "open arms" immigration policy. There is also criticism of the welfare state (known as Folkhemmet – people's home), with some linking its slipping standards to the strains that immigration has placed on it.

The ruling Social Democrat party has seen its popularity plummet in recent years, with some support going to the extreme left but most of it to the right-wing of the political spectrum. Compared with other societies, the decline in Sweden's social mood seems (characteristically) mild, but it has traced out a familiar path.

Our chart shows the Swedish stock market's (currency neutral) relative performance to the Eurozone (black line), along with the Swedish krona trade-weighted index. Having outperformed since 2002, the Swedish stock market started underperforming the Eurozone in 2012. This relative measure has been signaling that social mood in Sweden has been subtly trending negatively for over half a decade.

The close relationship with the Swedish krona is a reflection of capital flows as investors have sought returns elsewhere. If Swedes do vote in numbers for more populist, right-wing agendas this weekend, many commentators will portray it as a bit of a shock. The truth is, though, that a shift to the political extremes will provide a symptomatic exclamation mark to a negative social mood trend that has been going on for years.

One of Sweden's greatest gifts to the world has been the music of the legendary 1970s group ABBA. Essentially upbeat and optimistic, it appears to be in stark contrast with the Sweden of 2018.