Sustained equity growth and strong pension returns this year despite brief summer slump
Financial markets carried the positive sentiment from earlier this year into the third quarter, which saw gains for both equities and bonds. As a result, Velliv’s customers were able to return from their summer break to find increases in their accounts, regardless of age and risk profile. For customers with a medium risk profile and at least 15 years until disbursement, returns on VækstPension ranged from 8.1 per cent in Aktiv to 10.1 per cent and 10.0 per cent respectively, in Index and Aftryk.
| Return in 2024 | VP Aktiv | VP Index | VP Aftryk |
| Low | 6.3 per cent | 7.1 per cent | 7.3 per cent |
| Medium | 8.1 per cent | 10.1 per cent | 10.0 per cent |
| High | 9.9 per cent | 13.7 per cent | 13.2 per cent |
Turmoil in August sent shock waves through markets
Investors worldwide were briefly sent into a tailspin at the start of August with significant price drops. This occurred after the Japanese central bank unexpectedly raised interest rates, while the monthly US labour market report simultaneously disappointed, fueling fears of an American recession. We assessed that the market reaction was overblown, as the underlying picture remained unchanged. Subsequently, stock markets have indeed recovered, while interest rates have risen slightly.
The US presidential election is approaching on the horizon
On 5 November, Americans will elect a new president. From an investment point of view, the stock market has since 1980 provided solid average annual returns of over 10 per cent, whether the president was "red" or "blue". The only exception was during George Bush's presidency in 2001-2009, when the financial crisis resulted in negative average annual returns. In other words, it appears that economic development is more important for stock markets than who is president.
US Congress - split or not?
"In the past 40 years, the difference between good and excellent returns has been a matter of whether Congress was split or not. A split Congress brings more stability, and this is what financial markets prefer. Therefore, we will be keeping an eye on the composition of both chambers when we adjust our investment strategy in the wake of the election," says Pernille Bomholdt Henneberg, Chief Economist at Velliv.
”It is difficult to say whether one candidate or another would be good news for financial markets," she continues. "For example, if Kamala Harris were president, it is likely that interest rates would be lower, but the picture is more mixed on the stock side. Higher corporate taxes are negative for stock markets, whilst a reduced risk of further trade wars pulls in a positive direction. And we can find similar conflicting expectations with Trump. That is why we are following the election very closely.”
We are looking positively to the rest of the year
We are looking positively to the rest of the year, even though turbulence may occur. The US economy is robust, and central banks are using rhetorics leading us to believe that the year will end with decent positive returns on your pension savings. Stock markets are supported by positive growth, falling inflation and the prospect of further interest rate cuts. A significant interest rate drop would require a greater concern about recession. We do not expect that. Conversely, a stronger growth picture and higher inflation could keep interest rates up.