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Comment: A stock market on the crest of a wave

Nyhed   •   Jun 14, 2018 09:57 CEST

Despite factors such as tax concessions in the United States, investment markets generally got off to a good start, with positive, handsome returns in January. However, a jobs report from the US showing higher than expected wage increases halted that trend, and global equities experienced their biggest decline since 2016. The news of a potential trade war between the US and China added further fuel to the fire, and accordingly the markets took a further dive in March. Not unexpectedly, therefore, Q1 2018 turned out to be a tough quarter.

Danica Pension was hardest hit
In high-risk savings, Danish commercial pension companies delivered between -3.3 % and -1.8 %. The hardest hit were clients with savings in Danica Pension. A major investment in European equity markets failed to perform, while partially unhedged exposure to the US dollar also reduced returns. Taking into consideration the fact that Danica prides itself on offering one of the market’s most robust portfolios, this result cannot be considered satisfactory.

SEB Pensions invests heavily in shares
Customers of SEB Pension felt the consequences of the fact that SEB has been investing more heavily than usual shares for some time now. SEB remains of the view that 2018 will be a good year for stock markets, but a bear market always punishes savers particularly hard. On the bright side, SEB’s clients can look forward to correspondingly larger returns in the next bull market.

AP Pension came best through Q1
Seen across all risk levels, AP Pension’s clients came out on top during this quarter. Despite a large decrease along the way, the IT sector performed relatively well, and AP Pension’s disproportionate position in the sector contributed positively. Relatively strong hedging of currency risk also contributed to reducing losses on the Greenback, which fell 3.1 % in Q1 2018.

Reduced risk and increased hedging at Topdanmark
Topdanmark’s customers also have reason to be satisfied with the results for Q1. In recent years, Topdanmark has reduced the risk in its investments while increasing hedging of foreign currency risk. The combination of these two factors resulted in Topdanmark delivering the second-best result for the quarter.

Aon recommends
Investment in shares also entails a risk of periods with negative returns. However, it is important to bear in mind that pension savings are a long-term investment, and that the minor turbulence experienced by Danish savings companies in Q1 will not stand in the way of long-term savings being best served through investment in equities and similar risk assets.