Despite ongoing concerns about the coronavirus, 2021 was a remarkable and spectacular investment year.
Unequalled economic recovery: COVID-19 vaccines acted as a catalyst.
The coronavirus continued to dominate the news and at several instances lockdown measures were necessary. Yet, the economy and society were better able to cope with the coronavirus restrictions. As a result, companies were able to report both rising sales and profits.
The economy's ability to recover led to positive stock returns. Stock markets, for example, saw an impressive rise in prices, leading to a historically strong year for shares (see Figure 1).
Figure 1. Development of developed market shares
(MSCI World Total Return Index in euros). Source: Bloomberg
The economic recovery led to tightness of the labour market with historically low unemployment figures in, among others, the Netherlands and the United States. In addition, there were supply problems for various industries, such as the automotive industry (chip shortage). The Ever Given getting stuck in the Suez Canal did not help either in dealing with problems in the supply chain.
After the summer, it was mainly the rising inflation figures that prevailed in the news. Inflation rose rapidly not only in Europe, but also in the US. Statistics Netherlands (CBS) published an inflation rate of a staggering 5.7 per cent at the end of 2021. As a result of rising inflation, central banks eased their stimulus measures to further curb inflation by 2022.
Due to all developments, 2021 was (just like 2020) an eventful year, but one in which nearly all investment categories showed great results. The pension fund therefore ended 2021 with a positive return of 9.6 per cent (2.7 billion euros). With this, the pension fund outperformed the benchmark by 1.3%.
The interest rates were not unaffected in 2021 either. After interest rates fell in 2020, they rose again in 2021 (see Figure 2). A higher interest rate signifies good news for the pension fund as it means that the fund needs to have less money in cash to cover its pensions. This is why rising interest rates have a positive effect on the pension fund's funding ratio.
Figure 2. Development of the interest rate (20-year euro swap rate). Source: Bloomberg
Due to the excellent results, SSPF managed to fully index its pensions and compensate for the indexation missed out on in 2021.
Figure 3. *Includes cash, cash equivalents and currency swaps, for which the performance and benchmark are not determined.
In the year that the first vaccinations were put in place in the Netherlands, supporters of Trump stormed Capitol Hill, Kaag danced on the tables and Angela Merkel said goodbye, the world experienced a spectacular year for the stock market. But what does that mean for your retirement? Shell Pension achieves unique results.