Strong returns in 2024 – but what can we expect from 2025?

At Velliv, customers with VækstPension Index achieved the highest return of 14.3 per cent in 2024, making our affordable savings product one of the absolute winners among pension companies this year.

Right up to the final stretch, there were chances that 2024 would end as one of the best years ever for returns. However, the market took a dip in December – and overall, the market lost some steam in the second half, marked by increased market uncertainty. In this more challenging market environment, both Velliv Index and Velliv Aktiv performed well, with VækstPension Index emerging as a clear winner.

Positive outlook for 2025, but not with returns like 2024

Market uncertainty has characterised the start of 2025, mainly because many are uncertain about which parts of the political programme Donald Trump will focus on when he takes office as the 47th President of the United States on 20 January. In general, Trump's presidency is one of the uncertain factors that are difficult to assess at present. On the negative side, an escalation of trade wars and increased tariffs are notable concerns. On the other hand, deregulation, tax cuts and a possible end to conflicts in the Ukraine and the Middle East could have a positive impact on both the US economy and global economy.

The US is expected to remain the driving force behind global growth. If this expectation holds true, it will be the third year in a row that the US economy has outperformed other developed economies in terms of growth. A key factor behind the strength of the US economy is the still optimistic American consumer, who is also expected to benefit from a solid labour market and gains in real income in 2025.

Europe facing headwinds

In contrast, the European economy is facing headwinds. In particular, the significant industrial sector in Germany is in a critical state, and all indications are that the European Central Bank will try to kickstart the European economy with further interest rate cuts in 2025 – and at a faster pace than we expect to see in the US. The expectation is not least reflected in the fact that inflation is expected to fall again in 2025, although we saw somewhat disappointing figures for inflation development at the beginning of January.

Velliv's expectations for investment markets in 2025

The outlook for 2025 is that it will be a year of economic growth, with inflation decreasing and monetary policy returning to a more normal footing. However, the past few years have taught us that both geopolitical developments and financial and tax policies - particularly in the US - are again significant factors in the global economy. We will pay extra attention to these risks in 2025.

With expectations of falling interest rates, we believe that bonds in 2025 will deliver a solid return that exceeds our long-term expectations, which average three per cent. In our view, bonds seem undervalued, while we believe that stocks are priced on the higher end of the scale. This is particularly true for large US companies, which were primarily responsible for last year's big gains on the stock market. Nonetheless, we expect stock returns to be in line with our long-term average of seven per cent.

Although it rarely goes as planned, we currently expect a return of around five to seven per cent for a balanced portfolio with 15–20 years until retirement.