Danish pension provider PFA has said it is working with a range of outcomes for its full-year return, which is expected to land between 0 and 10 per cent, due to continued uncertainty around tariffs, inflation, interest rates and currency movements.

PFA chief strategist, Tina Choi Danielsen, said she is generally more optimistic about market developments than she was in the spring.

However, PFA said that the US dollar has fallen by roughly the same percentage against the Danish krone, eroding returns when converted to Danish kroner.

Danielsen noted the US dollar is at its "lowest level" against the Danish krone over the past three years, so even with strong equity returns in the US, the gains have been more modest for Danish investors.

"At PFA, we have continuously protected our customers against the risk of a weaker dollar, and this has contributed positively to the return, which for a typical PFA customer at the beginning of August is just under 5 per cent," she said.

PFA also observed that the stock markets have entered the summer period with “renewed optimism”, with the US S&P 500 stock index rising to about 8 per cent since the start of the year to a "new record high".

PFA said it was largely due to a strong start to the financial reporting season in the US, where several big companies have reported better-than-expected results.

Meanwhile, it reported that sentiment has become more balanced despite the political risks that previously have shaken investors.

Indeed, Danielsen said: “Investors are taking US President Donald Trump's changing tariff announcements with much more calm than before. It has been seen that the threats are often withdrawn or watered down before they become a reality.

“This has given a real boost to the stock markets, which have also benefited from a good start to the US financial reporting season.

“In this way, the focus is currently more on what is going well than what can go wrong, including the trade policy risks that characterised the markets in the spring.”

She also pointed out that despite the more subdued reactions, the markets are still sensitive to the US President's “changing whims”, as last week’s rumour of a possible firing of US Federal Reserve chair, Jerome Powell, briefly caused investors to send stocks down “significantly”.

Danielsen said the S&P 500 “plunged sharply” in a few hours when it was rumoured that Trump intended to fire Powell, but the shares rose again when Trump himself denied the rumour.

“Even though the markets have become more hard-skinned, it shows that the central bank's independence is highly valued," Danielsen said.

Trump's criticism of Powell was due to the central bank not yet lowering interest rates, which, according to Trump, “sabotages the chances of kick-starting the US economy more”.

However, PFA explained that it is said that it is not possible to lower interest rates as long as both tariff policy and its long-term consequences for the economy are uncertain, just as inflation in the US is still well above the desired 2 per cent.

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