Market update: Fourth quarter 2023

Last quarter was a good quarter for financial markets. All asset classes showed positive investment returns. Softer inflation has created optimism in the market. With this softer inflation, interest rates have stabilized and there is speculation of possible declines in the future. This has led to a rise in the value of bonds and stocks. What does this mean for your investment plans?

Looking back at Q4 2023: interest rate stabilization and subsequent optimism in the market

Last quarter, central banks decided to keep interest rates steady after inflation in the European Union and the U.S. came in lower than previously thought. 

The U.S. central bank decided to keep interest rates unchanged at 5.25%-5.50% during the past winter months. The European Central Bank decided in the months of October through December to keep short-term interest rates stable. Central banks expect to lower interest rates in 2024, provided inflation continues to fall. An inflation rate of 2% is targeted in the Eurozone.

The stabilization of interest rates last quarter led investors to realize that the peak of interest rates may be behind us, and there may even be a drop in short-term interest rates in 2024. This possibility has created optimism in the market, which is reflected in the appreciation of stocks and bonds.

Best fund performance in fourth quarter 2023:

Northern Trust World Small Cap ESG Low Carbon Index Fund +8.42%

Last quarter brought positive investment returns for all of Vive's asset classes, from money market to equities. Even for bonds, it was a strong quarter because of the decline in interest rates for long maturities. The equity portfolio as a whole showed a return 6.7%. The highest return was achieved in small company stocks at 8.42%. 

Geopolitical turmoil, what does it mean for my portfolio? 

There is a lot of geopolitical turmoil right now. This creates uncertainty, something that can also manifest itself 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 the prices of oil, natural gas and gold to rise.  

Stocks in companies that suffer from this will show weaker returns. Should you act on this and adjust your portfolio accordingly? No, Vive's investment model ensures that your portfolio is as diversified as possible for your level of risk. This means that this kind of turmoil will have little effect across the board of your portfolio.

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 risk profile such that it requires adjusting your current investment portfolio, Vive automatically takes care of that. And consistently sticking to your investment strategy with well-diversified portfolios is the key to long-term success.