Tariff pause leads to record stock returns

Trump's announcement of a 90-day tariff pause for all countries except China sent stocks soaring yesterday with record-breaking single-day increases. According to PFA’s chief strategist, Tine Choi Danielsen, the sudden stock surge indicates that pension customers would be wise to stay calm during these times, as the markets are in a historically turbulent period where significant rises can follow major declines.

"The biggest day in financial history." That is how Trump himself described yesterday, when his announcement of a 90-day pause in the trade war sent American stock markets skyrocketing.

And looking at the increases, there is no doubt that these were historic jumps upwards.

"Normally, it is said that stocks take the stairs up but the elevator down, but yesterday that routine was forgotten for a while. Looking at the three leading American stock indices, Nasdaq, S&P500, and Dow Jones, they rose by 12.1, 9.5, and 7.9 percent respectively, which are some of the largest single-day increases in the indices' history," says PFA’s chief strategist, Tine Choi Danielsen.

She adds that a sigh of relief has also spread to other stock markets, and that both European and Asian stock exchanges opened the day with green figures and solid increases.

Market nervousness still high
With the increases, the recent weeks' stock declines have been significantly reduced, benefiting Danish pension savings among others. However, we are still far from the stock peak back in February 2025, and Tine Choi Danielsen also emphasizes that market unrest remains unusually high.

"Looking at the so-called VIX index, which is used as a barometer for market nervousness, it is currently at its highest level in five years and has only been higher during the corona lockdowns in 2020 and the financial crisis in 2008. This is a clear sign that the unrest is far from over. We therefore expect the volatility to continue in the coming period, and our advice to customers remains to stay calm, think long-term, and let PFA manage the risk. Because right now, as yesterday showed, it can be costly to panic and exit the markets at the wrong time," says Tine Choi Danielsen.

She understands that pension customers may be anxious these days and reminds that customers in PFA's recommended pension products are covered by an automatic risk reduction, which decreases the risk of large return fluctuations as they approach retirement.

Markets facing ninety crucial days
While PFA's chief strategist is pleased with the record-breaking stock increases and that the Trump administration has shown a pain threshold when it comes to stock declines, she also emphasizes that the trade war is not over. Trump has thus raised his tariff wall against China to 125 percent, and China has responded with massive retaliatory tariffs of 84 percent on American goods.

"Trump's critics have already renamed his 'liberation day' to 'recession day', and although the 90-day tariff pause has improved economic prospects, it is very doubtful whether the US and China can stave off an economic slowdown if the ongoing trade war is not de-escalated. Finally, Trump's shifting statements have created enormous uncertainty, negatively affecting both markets and the real economy, and this uncertainty has not disappeared with yesterday's dramatic reversal," says Tine Choi Danielsen.

At PFA, the situation between China and the US will therefore continue to be closely monitored, as will the negotiations that the US will have with the rest of the world over the next 90 days. This provides an opportunity to adjust PFA's overall investment risk as developments become clearer.

"Earlier this year, we advantageously sold some American stocks as we assessed that uncertainty had increased. These are levers we can continuously pull. Additionally, we remain highly focused on diversifying our investments across a broad portfolio of return sources, including stocks, bonds, infrastructure, real estate, and much more. This helps stabilize returns in turbulent times and mitigate the fluctuations that can arise from current trade policy tensions," says Tine Choi Danielsen.