Review of investment year 2024

After a good investment year 2023, we can also look back on 2024 as a good year in which both equities and bonds posted positive investment results. In this article, we give a brief overview of what happened on the stock exchange last year and the impact this has had on pensions with BeFrank.

Compared to the end of 2023, the European Central Bank (ECB) gradually cut interest rates from 4% to 3%. The US Federal Reserve (FED) also cut interest rates by 1%. Inflation remained slightly above the ECB’s 2% target in the past year. As a result of these developments, short-term interest rates fell. Long-term interest rates rose modestly, while inflation remained virtually at the same level. This did not lead to negative returns. Geopolitical conflicts continued to increase, but did not have a major impact on the stock market.

Magnificent 7

The term ‘Magnificent 7’ refers to the seven Big Tech companies, which often have a significant impact on equity markets. These companies (Apple, Microsoft, Amazon, Alphabet [Google], Meta [Facebook], NVIDIA, and Tesla) continued to contribute significantly to equity returns in 2024, due to their strong financial performance and impact on technology and broader markets.

US elections

In addition, the US presidential election of 2024 also had a significant impact on the financial markets. The uncertainty surrounding the election result initially increased market volatility. Due to investor caution, there was an increase in demand for safe havens such as gold and government bonds. On balance, Trump’s swift and clear election victory led to strong positive sentiment in the financial markets, but with large differences between companies and sectors. Technology companies, for example, showed excellent performance, while many explicitly sustainable companies fell in value.

Positive returns on equities and bonds

Equities of large and medium-sized developed market companies outperformed in 2024, achieving a return of over 20%. However, emerging market equities also returned more than 10%.

In the bond markets, government bonds achieved positive returns, mainly due to interest payments. Due to the declining credit risk premium (credit spreads), corporate bonds outperformed government bonds.

Impact on pensions

We saw positive returns for all ages and risk profiles last year, which is good news for both younger and older employees. For younger employees, we would like to achieve a positive investment result in the longer term. This will allow their pension capital to grow, which can ultimately be used to purchase a good pension. For older employees who are nearing retirement age, we are increasingly focusing on keeping the expected pension benefits as stable as possible. As an example, we take limited risks with equities because there is less time to make up for a potential shock just before retirement. However, this does not mean that the value of investments will always remain stable. In 2024, we achieved positive returns for older employees as well.

Diversification reduces risks

BeFrank invests pension capital worldwide in many companies from different sectors and across different asset classes, such as equities and bonds. This diversification reduces risks. In addition, as retirement age approaches, we automatically invest less pension capital in classes such as equities. At BeFrank, employees decide for themselves how much risk they want to run with their pension investments and how investments are made. They can change this at any time using the Profile Selector on their personal pension page.

Always insight into returns

We publish the returns of the various lifecycles on our website every quarter. Employees can track their investment returns wherever and whenever they want in the app and on their personal pension page.