Market update: Third quarter 2023

The past quarter was a challenging quarter for equities, with a return decline of -0,6%. Only money market investments and corporate bonds showed a positive investment return. The continued rise in interest rates could potentially slow down economic growth and corporate profits, leading to increasing uncertainty in the financial markets. But what does this mean for your investment plans?

Review of the third quarter of 2023: Expected slowdown in growth due to interest rate hike

Central banks also raised the short-term interest rate last quarter with a view to controlling inflation. The American central bank raised the interest rate by 0.25%. In the eurozone, the 3-month interest rate increased slightly by 0.3% compared to last quarter, reaching a level of 3.7%. The further rising interest rate made investors realise last quarter that economic growth could be slowed down as a result. This will also likely lead to lower corporate profits. That is bad news for equities, which showed a worldwide decline in value. Investors are anticipating high interest rates in the future, which caused the value of government bonds to fall. The volatility of the stock markets is rising, which points to more uncertainty about future developments.

Best fund performance in the third quarter of 2023:

Northern Trust Global High Yield ESG Bond Index Fund +2,42%

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The past quarter brought a positive investment return for the investment categories money market investments and corporate loans. The high-yield corporate loans showed the highest return, with European corporate loans performing better than American ones last quarter. The short-term interest rate has risen, so the return for money market funds was slightly higher than last quarter. Based on the current interest rate, the return on money market funds for 2023 would amount to 2,9%, and that is more than what many savings banks offer in interest.

More uncertainty in financial markets, what does that mean?

We see the VIX index, which is the index that measures the expected future volatility of stock prices, increasing. This means that uncertainty in the financial markets is increasing. Should you then radically lower the risk profile of your investment plan so that you divest all your equity investments? No! History teaches that you cannot estimate in advance when stock prices will fall or rise. The only way to capture the long-term return on equities is to patiently remain invested in them.    

We continue to repeat our message: 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 the app to see how you have set your acceptable risk level for your investment plans. Movements in the financial markets are not a reason to adjust your risk. A change in your personal situation could be, however.

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

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