Market update: Second quarter 2024

After a strong first quarter, financial markets showed a mixed picture in the second quarter of 2024. Equities experienced a troubled period after their good start. Bonds continued to perform moderately, this was due in part to persistent inflation and high interest rates. 

Looking back at second quarter 2024: A troubled period due to persistent high interest rates.

The second quarter of 2024 once again demonstrated how volatile financial markets can be. Whereas the first quarter of 2024 was dominated by optimism and high stock market returns, this did not continue for long. Indeed, the second quarter saw the mood shift to a more negative outlook. 

The second quarter of 2024 was dominated by politics in Europe. The outcome of the European elections, and the subsequent parliamentary elections in France. This resulted in a decline in stock prices. However, the prices of U.S. stocks were not affected. These rose in the past quarter, mainly due to continued enthusiasm around Artificial Intelligence (AI). Emerging market equities generally had a strong quarter. 

With persistently high inflation, central banks were expected to make fewer interest rate cuts. The Federal Reserve, the U.S. central bank, made the choice not to adjust interest rates and announced only one interest rate cut, two less than expected in March.

However, the European Central Bank did announce an interest rate cut in June despite persistent inflation data. 

As a result, bonds became less attractive. This is because bond interest rates fall when interest rates in general fall. When interest rates fall, bonds with the old, higher interest rate become worth more.

The yield on creditworthy bonds of governments and large corporations depends heavily on interest rates.

Central banks kept interest rates high to reduce inflation, causing lower yields on creditworthy bonds. High yield corporate bonds still did well.

Best fund performance in second quarter 2024:
Northern Trust Emerging Markets Custom ESG Equity Index Fund + 5.90%

Changes in the market, what does it mean for my portfolio?

The second quarter showed again how volatile the market can be. The market reacts to outside news, including the results of the elections in Europe. As a result, sentiment about the financial market can change quickly. Predicting when exactly the stock market will fall or rise, however, is proving virtually impossible. It now seems that the market has started an upward trend again, but this can never be said with certainty.

Therefore, our advice remains the same. Don't adjust your portfolio to short-term changes in the market. The Vive investment model ensures that your portfolio is as well diversified as possible across different financial products (bonds, funds, stocks, et cetera) for your level of risk. Thus, in the long run, such changes have little effect on your portfolio. 

Don't let the market disrupt your long-term goals.

Keep following your goals and adjust your portfolio only when your personal situation changes, not based on market changes or sentiment. Sticking to your investment strategy with a well-diversified investment portfolio remains the key to long-term success. See in the app how your risk level is set and monitor your investment plan to continue meeting your long-term goals.