Despite continued geopolitical uncertainty, Danish pension provider PFA has said that its equity risk remains in line with its long-term planning, with the US/China trade truce providing a further boost to large technology firms.

PFA's latest update revealed that robust recent financial statements and a trade truce between the US and China have given new momentum to shares, in turn boosting member returns.

For a typical PFA customer, the year's return is now close to 10 per cent, while over the past three years it has turned into an accumulated return of 40 per cent.

Much of this growth was thanks to the performance of the stock market, as PFA noted that, despite a year marked by trade tensions and global unrest, the stock market rally remains intact and is now entering its third year.

It also pointed out that global growth has remained at a stable level, and the ongoing accounting season in the US is showing promising results that generally support the positive trends.

"Over 70 per cent of the companies in the S&P 500 have now reported their third-quarter results," PFA chief strategist, Tine Choi Danielsen, said.

"The majority have delivered increasing profits and exceeded investors' earnings expectations. This has given the stock markets a tailwind, and everything therefore indicates that we are on our way to another year with positive returns – for the third year in a row."

The focus on large technology firms has been a key driver behind these results, as the PFA acknowledged that giants such as Amazon, Microsoft, Nvidia, Alphabet have been the central return engine in recent years.

And there were no negative surprises even amid recent market volatility, as PFA said that the majority of the large tech companies were able to report continued progress with increasing earnings.

However, PFA confirmed that whilst it remains well invested in these companies, it is also aware of the risks that come with the extreme concentration of value.

However, Danielson argued that "it is also risky to choose them out", arguing that "there is no doubt that you would have missed out on significant returns if you had not been invested in these companies".

Indeed, Danielson revealed that these firms have accounted for up to 40 per cent of the return from the American S&P 500 stock index in the past three years.

Danielson explained that the recent US/China trade truce has helped with this, acknowledging that these companies' progress is largely driven by a robust global economy, which has recently received support from the trade truce between the US and China.

The agreement has, at least temporarily, put a lid on the conflict over tariffs and export restrictions on, for example, microchips and critical raw materials.

"All in all, it is therefore difficult to spot dark clouds that could immediately dampen growth or throw gravel into the stock market, although visibility could be better," Danielson stated.

However, she clarified that whilst the geopolitical uncertainty has probably subsided, "it is far from gone".

"We have seen before that many of Trump's trade agreements have been written in sand rather than cast in cement," she continued, also pointing out that economic visibility is currently challenged by the US government shutdown, which means that key key figures are currently missing - including for the labor market.

However, despite uncertainty about geopolitical conditions and temporarily limited access to updated economic key figures, the PFA confirmed that the "fundamentals remain favorable", and that it therefore maintains an equity risk that is in line with PFA's long-term strategic starting point.

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