Market update: Second quarter 2024

After a strong first quarter, the financial markets showed a mixed picture in the second quarter of 2024. Shares experienced a turbulent period after their strong start. Bonds continued to perform moderately, which was partly due to persistent inflation and high interest rates. 

Review of the second quarter of 2024: A turbulent period due to persistent high interest rates.

The second quarter of 2024 has once again shown how volatile the financial markets can be. Where the first quarter of 2024 was mainly characterised by optimism and high returns on the stock market, this did not last long. In the second quarter, we saw that the sentiment shifted to a more negative outlook. 

The second quarter of 2024 was marked by politics in Europe: the outcome of the European elections, and the subsequent parliamentary elections in France. This resulted in a drop in share prices. However, the prices of American shares were not affected by this. These rose last quarter, mainly due to persistent enthusiasm surrounding Artificial Intelligence (AI). Shares in emerging markets generally had a strong quarter. 

Due to the persistently high inflation, it was expected that central banks would implement fewer interest rate cuts. The Federal Reserve, the central bank of the US, chose not to adjust the interest rate and announced only one rate cut, two fewer than expected in March.

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The European Central Bank, however, did announce an interest rate cut in June despite persistent inflation figures. 

As a result, bonds became less attractive. This is because the interest rate on bonds falls when the interest rate generally decreases. With an interest rate cut, bonds with the old, higher interest rate become more valuable.

The return on creditworthy bonds from governments and large companies is highly dependent on the interest rate.

Central banks keep interest rates high to reduce inflation, which leads to lower returns on creditworthy bonds. High-yield corporate bonds still performed well.

Best fund performance in the second quarter of 2024:Northern Trust Emerging Markets Custom ESG Equity Index Fund + 5.90%

Changes in the market, what does that mean for my portfolio?

The second quarter once again showed how volatile the market can be. The market reacts to external news, including the outcome of the elections in Europe. As a result, the sentiment about the financial market can quickly change. However, predicting exactly when the stock market will fall or rise proves virtually impossible. It now appears that the market has started an upward trend again, but this can never be said with certainty.

Therefore, our advice remains the same. Do not adjust your portfolio based on short-term market changes. The Vive investment model ensures that your portfolio is optimally diversified across various financial products (bonds, funds, shares, et cetera) for your risk level. This way, these types of changes have little long-term effect on your portfolio. 

Do not let the market disrupt your long-term goals.

Keep following your goals and only adjust your portfolio if your personal situation changes, not based on market changes or sentiment. Sticking to your investment strategy with a well-diversified investment portfolio remains the key to long-term success. Check how your risk level is set in the app and keep an eye on your investment plan to continue achieving your long-term goals.

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