Global equity markets have started the year on a strong footing, despite rising geopolitical tensions, although currency and trade risks continue to loom in the background, according to Danish pension company PFA.

The firm observed that markets have carried forward the positive momentum seen in 2025, with attention now turning to the corporate earnings season, which began this week and is expected to provide an early test of whether investor optimism is justified.

Despite heightened political unrest involving Venezuela, Greenland, and, most recently, Iran, it noted that investor sentiment has remained resilient, supported by expectations of fiscal stimulus, tax cuts and further interest rate reductions in the US.

Commenting on the market backdrop, PFA chief strategist, Tine Choi Danielsen, said investors had so far remained focused on growth rather than geopolitical risk.

“The political unrest has not scared investors away. The year has started with increases, and the focus is still on the positive growth expectations – driven by fiscal growth packages, tax cuts and the prospect of more interest rate cuts in the US,” she added.

Indeed, the global stock index, MSCI ACWI, has risen by 3.4 per cent since the start of the year, measured in Danish kroner, with gains recorded across Asia, the US and Europe.

Danish equities have been among the strongest performers, with the C25 index up 5.3 per cent.

In the US, optimism continues to be fuelled by artificial intelligence-led growth expectations and the outlook for looser monetary policy, while in Europe attention is centred on the rollout of Germany’s major investment package and increased defence spending.

However, elevated US equity valuations and Europe’s reliance on external energy and technology supplies remain key risk factors.

According to Danielsen, the current environment is not unprecedented.

“The current optimistic outlook with economic growth that goes hand in hand with low unemployment and limited inflation is reminiscent of previous periods," she highlighted.

"Both in the 1990s and in the 2010s, we experienced stock market booms that lasted almost a decade.

"There is no law of nature that says a boom must stop after three years,” stressed Danielsen.

However, for European investors, currency movements remain a concern, particularly following the sharp weakening of the US dollar against the euro last year, which eroded returns on US assets.

While the dollar has recently stabilised, Danielsen warned that further weakness cannot be ruled out, citing concerns over US central bank independence and trade policy.

She also cautioned against assuming trade tensions have fully subsided, noting that many agreements remain temporary and that geopolitical developments could yet trigger new sanctions.

The coming weeks may prove decisive, the PFA concluded, as fourth-quarter 2025 earnings are released and companies begin issuing guidance for 2026.

Investors are expected to scrutinise results closely, particularly as banks report first, followed later in the month by major technology firms.

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