Market update: Fourth quarter 2023

The past quarter was a good one for the financial markets. All investment categories showed a positive investment return. Softer inflation created optimism in the market. Due to this softer inflation, interest rates have stabilised and there is speculation about a possible future decline. This has led to an increase in the value of bonds and equities. What does this mean for your investment plans?

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Review of the fourth quarter of 2023: interest rate stabilisation and subsequent market optimism

Last quarter, the central banks decided to keep the interest rate stable, after inflation in the European Union and the US turned out lower than previously thought. 

The US central bank decided to keep interest rates unchanged at 5.25%-5.50% during the past winter months. The European Central Bank decided to keep the short-term interest rate stable in the months of October through December. The central banks expect the interest rate to be lowered in 2024, provided inflation continues to fall. An inflation level of 2% is being pursued in the Eurozone.

The stabilisation of the interest rate made investors realise last quarter that the peak of interest rates may be behind us, and there may even be a drop in the short-term interest rate in 2024. This possibility created optimism in the market, which is reflected in the increase in the value of equities and bonds.

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Best fund performance in the fourth quarter of 2023:

Northern Trust World Small Cap ESG Low Carbon Index Fund +8.42%

Last quarter brought a positive investment return for all of Vive's investment categories, from money market to equities. Even for bonds, it was a strong quarter due to the fall in long-term interest rates. The equity portfolio as a whole showed a return of 6.7%. The highest return was achieved in small-cap equities, namely 8.42%. 

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Geopolitical unrest, what does that mean for my portfolio? 

There is a lot of geopolitical unrest at the moment. This creates uncertainty, which can also manifest in the financial market. Take the unrest in the Red Sea, for example. The attacks by Houthi rebels in Yemen on cargo ships in the Red Sea and the Suez Canal have led to a price increase in oil, natural gas, and gold.  

Shares in companies affected by this will show a less favourable return. Should you act on this and adjust your portfolio accordingly? No, Vive's investment model ensures that your portfolio is as well-diversified as possible for your risk level. This means that this type of unrest will have little effect across the entire line of your portfolio.

We continue to repeat our message: don't let the market disrupt your long-term goals. Vive's investment strategies take into account the risks that are acceptable for your plan. Check the app to see how you have set your acceptable risk level for your investment plans. Movements in the financial markets are no reason to adjust your risk. A change in your personal situation, however, may be. 

If you adjust your acceptable risk profile in such a way that your current investment portfolio must be adjusted, Vive will take care of this automatically. And consistently sticking to your investment strategy with well-diversified portfolios is the key to long-term success.

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