Market update: Third quarter 2023

Last quarter was a challenging quarter for equities, with returns down -0.6%. Only money market investments and corporate bonds showed positive investment returns. The continued rise in interest rates could well slow economic growth and corporate profits, leading to increasing uncertainty in financial markets. But what does this mean for your investment plans?

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

Also last quarter, central banks raised short-term interest rates for inflation control. The U.S. central bank raised interest rates by 0.25%. In the euro zone, 3-month interest rates rose slightly by 0.3% from last quarter, to a level of 3.7%. Further rising interest rates last quarter made investors realize that this could slow economic growth. This could also bring lower corporate profits. This is bad news for equities, which showed declines in value worldwide. Investors are taking into account high interest rates further into the future, which drove down the value of government bonds. Equity market volatility is on the rise, indicating more uncertainty about future developments.

Best fund performance in third quarter 2023:

Northern Trust Global High Yield ESG Bond Index Fund +2.42%

Last quarter brought positive investment returns for the money market asset classes and corporate bonds. High-yielding corporate bonds showed the highest returns, with European corporate bonds outperforming U.S. corporate bonds last quarter. Short-term interest rates rose so that the return for money market funds was again slightly higher than last quarter. Assuming current interest rates, the return on money market funds over 2023 would be 2.9%, which is more than what many savings banks are offering in interest.

More uncertainty in financial markets, what does it 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 financial markets is increasing. Should you then radically lower the risk profile of your investment plan so that you abandon all your equity investments? No! History shows that you cannot estimate in advance when stock prices will fall or rise. The only way to reap long-term returns on stocks is to continue to invest in them patiently.    

We keep repeating our message: don't let the market disrupt your long-term goals. Vive's investment strategies take into account the risks that are acceptable for your plan. See in the app how you've set your acceptable risk level for your investment plans. Movements in financial markets are not a reason to adjust your risk. A change in your personal situation may be.

If you adjust your acceptable level of risk such that it requires adjusting your current investment portfolio, 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.