Market update: Second quarter 2023

Last quarter brought a positive investment return for the investment categories: equities and corporate loans.

Global equity investments recorded the highest return: +7%. The bond markets stood still; the return on euro-denominated government bonds was 0%.

Central banks seem to be getting inflation under control. Savings rates are rising.

Q2 Review: moderate growth, slightly higher interest rates, and inflation under control.

Last quarter was relatively quiet on the financial markets. Central banks are keeping the short-term interest rate high to bring inflation under control. In the eurozone, the 3-month interest rate is rising, by 0.65% compared to last quarter, to a level of 3.4%. This higher short-term interest rate is filtering through to savings accounts and money market funds.

Bond markets are anticipating contained inflation and a stable higher long-term interest rate. Bonds suffered from the slightly increased long-term interest rate, which resulted in a quarterly return of 0%.

Corporate profitability showed moderate growth, and combined with interest rate expectations, this resulted in positive equity returns.

We are seeing particular price increases for companies focusing on growth from artificial intelligence (AI), such as IT companies and computer chip producers.

Equities in emerging markets lagged behind developed markets. Due to the rising tensions between China and Taiwan, investors see a higher risk here, which translates into lower prices.

These two equity markets have a weighting of approx. 30% and 15% respectively in the emerging markets equity index, totalling approx. 45%, and thus dominate this index. Therefore, equity investments in emerging markets are sensitive to this geopolitical risk.

The equity investments Vive holds for you in your portfolio consist of 80% shares of large listed companies in developed markets, 10% shares of smaller listed companies in developed markets, and 10% shares of listed companies in emerging markets.

This is how we spread the risk; the total return on equities was approx. 6%.

Best fund performance in Q2:


‍Northern Trust World Custom ESG Equity Index Fund +6.66%

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Last quarter brought a positive investment return for the investment categories equities and corporate loans.

The short-term interest rate has risen, so the return for money market funds was slightly higher again than last quarter.

The slightly higher long-term interest rates depressed the result of bonds and, to a lesser extent, corporate loans.

A stable interest rate at a higher level, what does that mean? 

When inflation is kept under control, and a wage-price spiral is thereby prevented, the economy will be able to show moderate growth.

The higher short-term interest rate will hurt companies heavily financed with short-term external capital; their profitability and solvency may be affected. 

For equities, the picture is mixed. The question can be asked whether the price rally of AI-related shares is a hype, just like the internet bubble from 1997 to 2001. Overall, the prospects are moderate.

Bonds will yield a higher return with a stable interest rate at a higher level, just like money market funds. Anyone who has money in a savings account will notice that the savings rate has increased.

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What does all this mean for my plans?

A higher savings rate may make you doubt whether you should sell part of your investments and put them into a savings account.

However, the higher interest rate has a stronger effect on money market investments, and in the long term also on investments in corporate loans and bond investments, than on the savings rate you receive from your bank.

Furthermore, we expect that the future higher interest rate has already been factored into equity prices, in other words that investors are focusing on future profits after deducting higher interest margins.    

Therefore, do not let the market disrupt your long-term goals. Vive's investment strategies take into account the risks that are acceptable for your plan.

Check in the app how you have set your risk level for your investment plans. The movements on financial markets are not a reason to adjust your risk. A change in your personal situation may be. 

If you adjust your  risk level in such a way that your current investment portfolio must be adjusted as a result, Vive will automatically take care of that.

And consistently sticking to your investment strategy with well-diversified portfolios is the key to long-term success.

Good to know

Vive’s statements are composed to inform and entertain. The content should not be considered financial advice. Asset management involves risks.

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