Denmark’s biggest pension fund, PFA pension, had been reducing its overweight to equities over the past month because of increasing uncertainty, and said it is now closely monitoring the effects of the trade war the US kicked off this week.
News on Monday that US president Donald Trump implemented his plan to impose trade tariffs on Mexico, Canada and China led to a sell-off of US stocks, with the S&P500 falling nearly 1.8% that day, extending those losses yesterday and today.
Tine Choi Danielsen, chief strategist at the DKK828bn (€111bn) pension fund, said: “Just as we saw last month, when Trump first made an attempt to impose tariffs on Canada and Mexico, the tariffs were poorly received by the stock markets.”
However, so far, she said the stock price declines remained within normal limits.
“It has only been two weeks since the S&P500 index hit a new record, so seen in that light, the reaction has so far been subdued, and the 4.8% drop from the peak is no greater than the negative corrections that typically occur over a year,” she said in the market commentary.
Writing ahead of announcements of retaliatory tariffs from Canada and other countries involved, Choi Danielsen said: “We are therefore still early in the process, but it seems undeniably as if Trump has become more risk-taking than in his first term.”
PFA said it was hard to know how Trump’s trade policy proposals would affect economic growth, which had so far been in good shape, not least in the US.
“However, if you look at consumer confidence in the US, there are signs that Americans have become less optimistic than just a few months ago – especially those who don’t share Trump’s political worldview,” the pension fund said.
PFA said it was therefore closely monitoring the situation, and due to the increasing uncertainty, has reduced its overweight in equities over the past month.
Choi Danielsen said the Copenhagen-based pension fund’s assessment was still that the global economy in 2025 would be strong enough to support positive development in the stock markets.
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