Global stock market turmoil - how best to react to uncertainty

As a pension saver, it can be difficult to know what to do when stock markets fluctuate. In this post, Lifeplan CEO and founder Kalle Erlandzon, PhD, explains how Lifeplan views the current situation – and why it’s usually best to stay calm. When the market is shaking, it’s more important than ever to lean on research and long-term strategies rather than acting impulsively on short term market events.

“The recent period has been characterized by great uncertainty in the financial markets as a result of the economic polices pursued in the United States and the unpredictability surrounding tariffs and trade conditions, but also because of the geopolitical turmoil caused by both the war in Ukraine and uncertainties about the future of Taiwan and Greenland, for example.

At Lifeplan, we fully understand that this is a cause of great concern for many pension savers and, of course, when there are major stock market declines, this also has real consequences for pension savings.

We are closely monitoring the impact on financial markets. Recent stock market declines are not the result of irrational panic, but of real expectations of a more uncertain economic future. The statement and policy-decisions of the parties involved in the looming trade war have a global impact, so markets react quickly to new information. The most important thing to remember is that stock prices are constantly adjusting to the latest information – and that no one can predict exactly how the market will develop in the near future.”

Why is it risky to try to time the market?

Research shows that fund managers who try to predict the market by increasing or decreasing risk according to their expectations, on average get worse risk-adjusted returns compared to a passive strategy where holdings are held through both ups and downs. In fact, a manager has to guess right 70% of the time for this to be profitable – a challenge that even the most experienced investors struggle with.

The most successful strategy, therefore, for professional managers and individuals alike, is to stick to their investments and avoid trying to predict market fluctuations.

Don’t let fear drive your investment decisions

When markets fluctuate, it is easy to let emotions take over. Individuals are often even less able than professional investors to predict market developments, which can lead to impulsive decisions. One of the most common mistakes is to sell your shareholdings after a major downturn, only to reinvest in shares after the market has recovered.

A clear example of this was during Covid, when many individuals withdrew from the stock market after the downturn and then waited too long to invest again. As a result, they missed a large part of the recovery. While it may feel safe to act when the stock market is shaking, research shows that the best long-term strategy is to sit tight and avoid making decisions based on short-term concerns.

We will contact our users if they need to adjust their savings

That is why we advise our clients to keep the investments we have recommended. We are constantly analyzing the market and will contact those who should make adjustments to their savings.

Lifeplan is customized to your circumstances

If, as a Lifeplan user, you still want to reduce the risk level of your pension savings, you can easily do so by logging in to Lifeplan and changing your risk appetite to “Very low”. We will then prepare an investment proposal for long-term savings that is tailored to those who want to be extra cautious. If you have any questions, you are always welcome to contact our support team on 031-10 98 70 or e-mail support@lifeplan.se.

We hope that this information has given you a clearer picture of how you, as a pension saver, should think when stock markets are in decline. There will come a time when the current turbulence is in the past, and until then we want you to be able to focus on other things, while we at Lifeplan focus on your pension savings.”