INVESTMENT RETURNS

Aon investment analysis

3rd quarter 2022

Next update due end of January 2023


New inflation highs, notable interest rate hikes and dwindling economic growth expectations

The third quarter of the year became another challenging one, where continued surging inflation and interest rate hikes once again have led central banks to lower their economic growth expectations for both the rest of the year as well as for 2023.

 

The Russian invasion of Ukraine has now for more than half a year had enormous humanitarian, economic, and safety political consequences. After the G7 countries indicated imposing a price cap on Russian oil in the beginning of September, Russian state-owned Gazprom suspended the gas supply from Nord Stream 1 indefinitely.

 

The consequences of the suspension regarding both energy supply, energy prices and the already record high inflation level, which ended at an all-time high level of 10,0 pct. in the eurozone by the end of the quarter, is not to be underrated.

 

By the end of the quarter, ECB raised its benchmark interest rates to the highest level since 2011. Further, the central bank indicated several interest rate increases in the coming months, to bring inflation down to the bank’s clear target of 2 pct. Similar is the indications of the Fed, who expects to keep interest rates at a level that restrains economic growth, to tackle surging inflation.

 

Indications from the central banks regarding interest rate hikes, exploded inflation levels and downgraded economic growth forecasts has affected market expectations and has led to sharply falling stock prices. Further, the overall increasing interest rate level has challenged bond returns. For all pension carriers, this has resulted in negative returns across the quarter.


SEE ADDITIONAL GRAPHS FROM THE 3rd QUARTER, 2022 HERE

Pension carriers' returns

SEE ADDITIONAL GRAPHS FROM THE 3rd QUARTER, 2022 HERE
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Contact

Mikkel Stuhr
Broking Executive, Investment
mikkel.stuhr@aon.dk


Archive

2nd quarter 2022
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*Aon's method of analysis
To ensure a fair comparison between the pension carriers' investment returns Aon uses an analysis model which ensures that the level of investment risk is the same across all of the returns being compared. This is done by decomposing the carriers' investment portfolios into sub-asset classes, which allows for a more precise definition of the amount of stocks and stock-like investments (share of risky assets) that each portfilio contains. Subsequently the portfolios are put back together in a way so that the amount of risky assets is exactly the same across all the carriers' portfolios. This allows for a like-for-like comparison of investment returns. It also means that Aon's comparison may show returns, that are different from those found on the carriers' websites and in the news media.

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