The past quarter was a good quarter for the financial markets. All investment categories showed a positive investment return. Softer inflation has led to optimism in the market. Due to this softer inflation, interest rates have stabilised and there is speculation about a possible future drop. This has led to an increase in the value of bonds and shares. What does this mean for your investment plans?
Last quarter, the central banks decided to keep interest rates stable, after inflation in the European Union and the US turned out lower than previously thought.
The American 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 to December. The central banks expect interest rates to drop in 2024, provided that inflation continues to fall. An inflation level of 2% is being pursued in the Eurozone.
The stabilisation of interest rates made investors realise last quarter that the peak of interest rates may be behind us and a drop in the short-term interest rate may even occur in 2024. This possibility has led to optimism in the market, which is reflected in the increase in the value of shares and bonds.
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 the money market to shares. Even for bonds, it has been a strong quarter due to the drop in interest rates for long maturities. The share portfolio as a whole showed a return of 6.7%. The highest return was achieved in small-cap shares, namely 8.42%.
There is a lot of geopolitical unrest at the moment. This creates uncertainty, which can also manifest in the financial market. Take, for example, the unrest in the Red Sea. The attacks by Houthi rebels in Yemen on cargo ships in the Red Sea and in the Suez Canal have caused a price increase for oil, natural gas, and gold.
Shares in companies affected by this will show a less favourable return. Should you trade on this and adjust your portfolio accordingly? No, Vive’s investment model ensures that your portfolio is diversified as well as possible for your risk level. This means that this kind of unrest will have little effect across the whole of your portfolio.
We continue to repeat our message: 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 may be.
If you adjust your acceptable risk profile in such a way that your current investment portfolio needs to 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.