Irish pensions fund trustees have been told to “diversify and de-risk over the coming year” amid the huge losses of global stock markets and falling bond yields for some European markets.
Pensions firm Aon said the fallout of market turmoil has led to a fall of 5.2% in “the traditional Irish pension managed funds” last month.
“Global equity markets fell over the month as weak economic data from China and Europe fanned concerns of a global economic slowdown, leaving investors fretting over the wider impact of a still-unresolved US-China trade dispute,” said the firm’s Nick Hatherley.
Global stock markets started the first day of the new year mixed, with Asian markets losing heavily, European stock markets ending mixed, and some new selling weighing on US stock markets.
“Much of the initial negative sentiment seems to be emerging from China” as the latest manufacturing output survey appear to suggest the US-China trade “has played a role in putting the brakes on”, said Fiona Cincotta at City Index.
“China’s growth has been a huge factor in the overall global economic growth story and its influence as a source of investment, credit and cheap manufacturing has been felt everywhere in the last 10 years. These numbers will be making investors nervous,” she said.
IG’s Chris Beauchamp said “bruised by the volatility” of recent months that “investors aren’t yet grabbing the chance to buy the dip with both hands”.
Germany’s Dax ended slightly higher, the Cac-40 in Paris was 1% lower at one stage, while the Ftse-100 in London ended little changed, buoyed by the weakening of sterling. The Iseq was up by over 0.25%.
Irish manufacturing expanded in December but at its slowest rate for nine months, as Brexit uncertainty slowed the growth of new orders, according to a new survey.
“How events play out at Westminster in the coming weeks is likely to prove pivotal,” said Investec Ireland of the IHS Markit Irish Purchasing Managers’ Index.
Experts have long pointed out that a significant slice of Irish pension funds were tied to the performance of US markets.
Brexit fears hit the Iseq hard last year to make it one of the worst performers in Europe.
The Irish index of shares lost 21% of its value.
Davy said the sharp drop which has pummeled shares as diverse as Bank of Ireland, Applegreen and Glenveagh “created a number of very attractive investment opportunities”. But the broker added: “Political uncertainty in the UK will continue to drive asset price volatility until Brexit is resolved”.