Pension performance update: April 2023

Spring is in full flow, with April showers and longer, lighter days making everything bloom. Much like the plants springing up everywhere, stock markets in the UK, EU, and US grew in April, and global bonds also had good returns. This continued the overall positive performance we saw in March.

We provide monthly updates on financial markets and pension performance, despite them being long-term investments. You’ve told us that you like to be kept abreast of how market movements affect your pension pots and for our part, we like to help alleviate any worries you may have regarding notable financial news.

How our pension plans performed

You’ll notice a steady upward trend since last Autumn in the graph below. Penfold's pension plans demonstrated continued stability during April, despite the fact that the global economy is still facing multiple challenges. Our plans consolidated the previous month's gains, achieving modest growth throughout the month.

What makes this possible? There's no hidden secret. Penfold's funds are built on strategically diversified portfolios designed to decrease risk exposure, limit potential losses, and improve overall investment performance. This approach is particularly valuable during challenging market conditions, as a well-diversified portfolio is more likely to withstand market fluctuations and deliver more stable returns over time.

US: Sustaining positive momentum amid banking uncertainty

Wrapping up April, the S&P 500, containing the 500 largest companies in the US, saw a 1.46% increase. This increase pushed the index up 16.2% from the lows of last October.

Given that a substantial part of our pension plans are invested in North American companies, the S&P 500 serves as a good barometer for the performance of our plans.

The stock market's performance was primarily driven by gains from some of the largest companies, including big tech firms such as Apple, Microsoft and Google. But, overall, investors experienced a mix of optimism and concern.

Your eye might be drawn to the big dip on 26th April which occurred the day before big tech companies announced their quarterly company earnings. Investors, mindful of significant layoffs at tech firms, sold investments in these companies before the announcements.

However, results posted were better than expected and the graph headed back north again; it’s just one more example of short term wobbles that have little bearing on the long term performance of investments like pensions.

Data from the first quarter of the year indicated slower economic growth in the US and signs of a weakening labour market. However, inflation appeared more controlled during this period.

As a result, many investors and analysts expect the Federal Reserve, the US central bank, to be more measured with interest rate increases in the upcoming months.

A slower increase in interest rates can lead to a more stable environment for stock market investors. This is potentially good news for Penfold’s pension holders, as it means higher returns on investments. If that happens, pension pots should grow.

The banking sector faced more uncertainty, with the collapse of First Republic representing the largest crisis yet in the industry. Despite this, investors remained relatively calm after JPMorgan and the US government stepped in.

As a reminder, while it's helpful to stay informed with the latest news, the S&P 500's upward trend over the past 30 years demonstrates that, despite short-term market fluctuations influenced by financial events, it's the long-term growth trajectory that is crucial for accumulating pension wealth.

UK: Uplifting stock market results despite sticky inflation

The FTSE 100, an index representing the 100 largest companies listed on the London Stock Exchange, experienced a 3.1% increase in April, outperforming both the US and the EU stock markets, as investors regained confidence and bounced back after the notable downturn witnessed in March.

Financial companies have been among FTSE 100 top performers in April, mainly due to the banking sector's recovery as concerns about the stability of US banks eased to some extent. Companies in the energy sector also performed especially well during the month.

In contrast with the FTSE 100's robust performance, concerns about rising prices in the UK economy persisted. The Office for National Statistics (ONS) reported that consumer price inflation remained higher than expected at 10.1% in March, exceeding the Bank of England's projection of 9.2%.

This situation led to the UK's central bank increasing interest rates again in May 2023 to manage inflation effectively in the long run. As mentioned above, a more unstable economic environment may affect stock market investments short term.

It's worth remembering that the value of the FTSE has a limited impact on your Penfold pension pot. That's because only a tiny percentage of it – anywhere from 3.75% to 12.5% based on your chosen plan – is invested in UK equities.

Remember you can check the geographic spread of your pension fund investment by tapping ‘Your Plan’ on your Penfold app, tapping on the name of your plan and then scrolling down to ‘Where is my money being invested?’.

Once again, even in the case of the FTSE 100, it's the long-term trajectory that truly matters when it comes to building your pension pot. Short-term market changes may occur, but it's the consistent growth over time that contributes significantly to your pension.

EU: Shy optimism with encouraging data

Eurozone stocks also increased in April, with all sectors improving except information technology (IT). Strong corporate earnings supported the growth, with the real estate and energy industries showing notable gains.

The IT sector faced challenges mainly because multiple companies that make computer chips (semiconductors) warned that there might be a more extended period of decreased demand for consumer electronics - e.g. smartphones, tablets, laptops, televisions, gaming consoles, etc.

Meanwhile, data showed that the EU economy bounced back slightly in the first quarter of the year, with a small but significant +0.1%, after zero growth in the final three months of 2022.

Despite the encouraging signals, the situation is not the same for all the EU countries; for example, Germany's economy still feels a more significant impact from the war in Ukraine, while other economies, such as Italy and Spain, returned to growth.

Germany was very reliant on Russian energy as the war started and has seen a slump in car sales, something that’s going to hurt the world’s sixth biggest automobile manufacturer.

See the performance of your pension fund in real time

A reminder that it’s easy to monitor the performance of your pension through our phone app. Tap ‘Your Plan’ at the bottom of the screen and move your finger along the line of the graph to see how your pension pot has grown. Or tap under the big figure at the top of the app screen where it says ‘Change’. This will give you a view of your plan’s performance.

With investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice and past performance is not a reliable indicator of future performance.