The past quarter was an eventful quarter for the financial markets. The overall optimism in the market has caused shares to rise to unprecedented heights. Bonds, on the other hand, have experienced challenging months, partly due to persistent inflation figures.
The fourth quarter of 2023 brought positive news due to higher than expected economic growth in the US. This, combined with worldwide encouraging signals of reviving economic growth, ensured that investors were optimistic at the start of 2024. Partly as a result, the stock market achieved historically high returns in combination with low volatility. While the stock market experienced high peaks, the bond market stagnated. This is mainly due to the persistent inflation figures. Because inflation is not decreasing, central banks have indicated that they will lower interest rates less than previously expected. This has caused returns on the bond market to stall. This especially affected government bonds and corporate bonds from very creditworthy companies. This is because the interest rate has a major influence on the return of these safe investments. Corporate bonds with more risk, also called High Yield corporate bonds, have performed better. This is because these investments also derive return from the credit risk of companies that are less well-regarded.
Best fund performance in the first quarter of 2024:Northern Trust World Custom ESG Equity Index Fund + 11.43%
The past quarter brought a very positive investment return for shares. Bonds performed less well, with corporate bonds from well-regarded companies and government bonds performing particularly poorly. The share portfolio as a whole showed a return of 10.2%.
The stock market performed exceptionally well last quarter. However, the sentiment in the market is that the stock market will drop again in the near future. According to Nobel Prize winner Robert Shiller, the prices of US shares have increased more than the profits of the underlying companies. This could lead to a downward correction on the stock market. “When prices get too far ahead of profits, a correction will eventually come,” he states.
Should you act on this and adjust your portfolio accordingly, for example by selling your shares? No! The Vive investment model ensures that your portfolio is diversified as optimally as possible for your risk level. This means that this kind of turbulence will have little effect across the entire range of your portfolio. Moreover, it is scientifically proven that it is almost impossible to time the market, meaning trying to predict when the stock market will fall. There's a good chance you'll miss out on returns if you do this.
Robert Shiller’s advice is: use cheap index funds to include the entire stock and bond market in your portfolio and hold onto them.
This aligns seamlessly with Vive’s message. We will repeat it once more: do not let the market disturb 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.
If you adjust your acceptable risk level 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 success in the long term.