Iceland’s Almenni pension fund has reported that the majority of its asset classes saw an increase in the first half of the year, but the decline of the US dollar and the rise of the Icelandic króna against other currencies negatively impacted the returns on its mixed securities portfolios.

The fund said that the stock markets' high volatility this year, which can be traced to announcements of the US government's tariff plans, left its mark on securities returns and developments in the foreign exchange markets.

The results found that the mixed return options that invest in both bonds and equities excluding Lifetime Portfolio III, an investment strategy offered by Almenni which is made up of 20 per cent equities, 55 per cent bonds and 25 per cent bank deposits, have decreased in the first half of the year by 1.2 percentage points, from 3.1 per cent to 1.9 per cent.

Meanwhile, foreign securities portfolios that only invest in foreign securities fell by 4.7 per cent, while Lifetime Portfolio III rose by 0.2 per cent.

The results also showed that portfolios investing in domestic bonds and deposits have risen by between 2.8 per cent to 4.1 per cent in the first half of 2025.

And the bond portfolio has risen the most in the first six months of the year, by 4.1 per cent, which corresponds to a real return of 1.5 per cent.

The deposit portfolio increased by 3.5 per cent in the first half of the year.

Additionally, the State Museum rose by 2.8 per cent, explaining the portfolio's returns on indexed bonds and the rise in the consumer price index. 

The fund also pointed out that the Morgan Stanley Capital International Global Foreign Equity Index has risen by 9.5 per cent in US dollars but has fallen by 3.9 per cent in Icelandic króna in the first half of the year.

It said this was due to the dollar weakening against other currencies and the appreciation of the Icelandic króna.

For foreign markets, increases continued in the first weeks of the year but from mid-February, all major stock markets fell because of the US government's plans to impose tariffs on imports.

At the beginning of April, a 90-day delay in the imposition of tariffs on the United States was announced, and the fund said that the stock markets rebounded well.  

Meanwhile, the domestic stock market had a “good start” to the year but the gains of the first few weeks of the year “reversed rapidly” also due to the US government's tariff plans.

In particular, the fund said that the effects of the fishing fee bill began to be felt on the domestic stock market at the beginning of June, and the market turned and went into a downward phase.

The total index of the main list fell by 10.9 per cent in the first half of the year. 

The Central Bank of Iceland lowered its policy rate three times this year, lowering it by 0.5 percentage points in February, by 0.25 percentage points in March, and again by 0.25 percentage points at its meeting in May. The policy rate will therefore be 7.5 per cent at mid-year.

Despite the policy rate cut, yields on both indexed and non-indexed government bonds have risen since the beginning of the year, leading to a decline in their value.

The the Nasdaq Iceland index for 10-year indexed bonds rose by 0.4 per cent, while the Nasdaq Iceland index for 10-year-long non-indexed bonds fell by 1.4 per cent in the first six months of the year. The CPI has risen by 2.6 per cent during the period.  

Almenni said that turbulence in the markets could be expected to continue in the coming weeks but noted that the 90-day deadline for tariffs on imports into the US expires on 9 July.

“Limited predictability in economic policy in the West Coast creates uncertainty and volatility in the markets,” it said.

“Tariffs have so far had a negative impact on the global economy, and it can be expected that production efficiency will be reduced and living standards will fall globally.”

It also highlighted that the ongoing war in Ukraine and at the bottom of the Mediterranean Sea is “causing concern”.

In Iceland, it said there is still uncertainty due to seismic activity in many parts of the country, which could have some impact on the economy, as well as uncertainty about the effects of the fishing fee bill and plans for further resource fees.

It said therefore that long-term investors should hold their own and invest assets in mixed portfolios that emphasise good asset and risk diversification. 

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