Last quarter brought a positive investment return for the investment categories: equities and corporate loans.
Global equity investments recorded the highest return: +7%. Bond markets paused; the return on government bonds in euros was 0%.
Central banks appear to be getting inflation under control. Savings interest rates are increasing.
Last quarter was relatively calm on the financial markets. Central banks are keeping short-term interest rates high to bring inflation under control. In the eurozone, the 3-month interest rate is rising by 0.65% compared to last quarter, reaching 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, resulting 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 manufacturers.
Equities in emerging markets lagged behind developed markets. Due to the increasing tensions between China and Taiwan, investors see a higher risk in this, which translates into lower share prices.
These two equity markets have a weighting of approximately 30% and 15% respectively of the emerging markets equity index, totalling approximately 45%, and thus dominate this index. Therefore, equity investments in emerging markets are sensitive to this geopolitical risk.
The equity investments that Vive holds for you in your portfolio consist of 80% equities of large listed companies in developed markets, 10% equities of smaller listed companies in developed markets, and 10% equities of listed companies in emerging markets.
This is how we spread the risk; the total result on equities thus came out at approximately 6%.
Best fund performance in Q2:
Northern Trust World Custom ESG Equity Index Fund +6.66%
Last quarter brought a positive investment return for the investment categories equities and corporate loans.
The short-term interest rate has increased, so the return for money market funds was slightly higher again than last quarter.
The slightly higher long-term interest rates dampened the result of bonds and, to a lesser extent, corporate loans.
When inflation is kept under control, and a wage-price spiral is thus prevented, the economy will be able to show moderate growth.
The higher short-term interest rate will hurt companies that are 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 interest rate has become higher.
A higher savings interest rate may cause you to doubt whether you should not sell a part of your investments and put it into a savings account.
However, the higher interest rate has a stronger effect on money market investments, and in the long term also on corporate loan investments and bond investments, than on the savings interest rate you receive from your bank.
Furthermore, we expect that the future higher interest rate has already been factored into share prices, in other words, that investors are focusing on future profits after the deduction of higher interest margins.
Therefore, 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 risk level for your investment plans. The 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 risk level in such a way that your current investment portfolio needs to be adjusted as a result, Vive will automatically take care of this.
And consistently sticking to your investment strategy with well-diversified portfolios is the key to long-term success.
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Statements by Vive are compiled to inform and entertain. The content should not be considered financial advice. Asset management involves risks.