The third quarter of 2024 was mainly positive. Despite significant fluctuations in August, all Vive investment categories ended in the black.
In the third quarter of 2024, global financial markets showed a predominantly positive trend, although there were some periods of increased volatility. In August, a disappointing jobs report in America caused uncertainty. Doubts also arose about the returns on large investments in technology such as artificial intelligence. Countries with tech-oriented stock markets, such as Taiwan and South Korea, were particularly hard hit by this. In addition, the central bank of Japan decided to raise interest rates. All of this led to a downward movement of stock prices in August.
Nevertheless, the stock markets recovered in September. This was mainly due to multiple stimulus measures, including an interest rate reduction by the US Federal Reserve Bank of 0.5% and by the European Central Bank of 0.25%. The Chinese government also announced significant new stimulus measures, which further supported the stock markets. The interest rate reductions resulted in good returns for shares of small companies (also known as “small caps”). These relatively smaller companies suffer more from high interest rates because high interest rates make external financing more expensive. Small companies often use external financing more than their larger competitors. As a result, a reduction in interest rates has a relatively greater positive effect on the shares of small-cap companies.
In addition to shares, the bond markets also performed well, partly thanks to the interest rate reductions. Investment categories such as corporate bonds and government bonds performed well.
In short, confidence returned in September. This recovery led to the quarter ending positively.
The third quarter was strongly influenced by the policies of central banks worldwide. Although there was positive news from the US and the EU, less favourable policy elsewhere, such as in Japan, caused uncertainty. These policy changes led to significant market fluctuations. Nevertheless, it has been shown once again that investors should not be guided by this volatility. Despite the fluctuations, the quarter ultimately yielded good returns.
Our advice remains unchanged. Do not adjust your portfolio based on short-term market fluctuations. The Vive investment model ensures that your portfolio is optimally diversified for your risk level. In the long term, these types of fluctuations have little effect on your portfolio.
Do not let the market disrupt your long-term goals.
Continue to pursue your goals and only adjust your portfolio if your personal situation changes, not based on market fluctuations. Adhering to your investment strategy with well-diversified portfolios remains the key to long-term success. As Warren Buffett, one of the most successful investors ever, says: “Outstanding long-term results are produced primarily by avoiding dumb decisions, rather than by making brilliant ones”.