Read below the recommendations of our CIO Anders Stensbøl on how to navigate the current financial markets turmoil as far as your pension savings are concerned.
2022 started off with considerable price fluctuations in the financial markets, caused by rising inflation rates. First, commodity prices and freight rates rose. Then inflation spread to other parts of society, causing a rise in food prices. The expectation that central banks will respond to the rise in inflation rates has resulted in soaring interest rates and declining share prices. In addition, the financial markets are now also affected by the situation in the Ukraine, causing an additional drop in share prices.
"We see greater fluctuations in the financial markets than we have seen for a long time. The cause is twofold and is to be found in the uncertainty as regards interest and inflation rates as well as the geopolitical situation in the Ukraine. Both factors contribute to the uncertainty, resulting in declining markets and investors being unsettled. Nevertheless, the world economy continues to look strong, and in many cases, the financial reports published by companies surpass expectations. Therefore we do not see any signs of a global economic decline and maintain our long-term strategy with a slight majority of shares in the portfolio. In our view, that is the only right thing to do. We say this because we know that uncertainty is lethal for the financial markets. We saw this most recently at the onset of the Covid-19 pandemic in 2020 when shares fell by up to 30%, but recovered quickly. And both 2020 and 2021 turned out to be really good years in terms of return on the investment of pension holders."
Anders Stensbøl recommends that you stick with the risk profile you already have for your market rate savings product.
"No matter what risk profile you have chosen for your pension savings, you should stay calm. It is in fact really difficult to hit the right days in a turbulent market. That is important to bear in mind – even when investment markets are extremely volatile. Trying to lower or increase your risk is incredibly difficult. The risk that you lose out in the course of such an attempt is far greater than the chance of making a profit. Experience from all previous crises confirm this. We have a broad risk diversification and many assets other than shares in our portfolio. In this way we take good care of your pension savings," Anders Stensbøl Christiansen concludes.
If you are a Velliv customer with a market rate product, you probably have a life cycle product with Velliv managing the risk and thereby tackling financial markets fluctuations. You need not do anything.
