Danish pension provider PFA has revealed it has reduced its overweight in equities over the past month due to “increasing uncertainty”.

PFA chief strategist, Tine Choi Danielsen, said that despite uncertainty, she assesses that the global economy in 2025 will be strong enough to support a positive development on the stock markets.

Choi Danielsen said the drop in the stock market, which fell by 1.8 per cent in the wake of Trump’s tariff announcements on Monday, 3 March (some of which have now been delayed), is no bigger than the corrections normally seen over the course of a year.

However, she said there is “no doubt that the tariffs have sown more uncertainty about the global economy and shown that Trump is willing to go further than many might have expected”.

Mexico and Canada are the US's two largest trading partners and supply the US with raw materials, food, electronic equipment and components.

"Just as we saw last month when Trump for the first time made moves to impose tariffs on Canada and Mexico, the tariffs were not well received on the stock markets. The leading US stock index, the S&P500, closed yesterday [3 March] with a drop of 1.8 per cent, giving us the worst day on the US stock market since mid-December," Choi Danielsen said.

Furthermore, she said the announcement about tariffs came on top of a series of disappointing news from the economic front and is therefore not surprised by the negative reactions. However, she said they should be seen in the context of the fact that US stock markets have increased by 16.3 per cent over the past year.

She continued: "It's not more than two weeks since the S&P500 index hit a new record, so seen in that light, the reaction so far has been moderate, and the 4.8 per cent drop from the peak is no bigger than the negative corrections that typically occur over a year

“The question is, of course, how the markets will develop when investors have had more time to digest the news and when we know how the tariffs will be countered by Mexico, Canada and China. We are therefore still early in the process, but it undeniably seems that Trump has become more risk-averse than in his first term.”

Choi Danielsen said that it is “difficult” to know how Trump's trade policy proposals will affect economic growth, which has so far been in good shape – not least in the US. However, looking at consumer confidence in the US, there are signs that Americans have become less optimistic than they were just a few months ago – especially those who do not share Trump's political worldview.

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