February 2025: Markets falling

• After a good start to the year, prices drop
• Potential trade conflict and international tensions make investors cautious
• Best to remain calm and focus on the long term

Prices drop after a good start to the year

While the Peaks portfolios still produced positive returns in January (up to +2.5% for Adventurous), the market took a downturn in February and the value of the Peaks portfolios declined. The Cautious portfolio fell to -0.6%, while the Adventurous portfolio dropped to -2.6%. This means that we are back to square one, with returns hovering around 0% since the start of the year.

Table 1: Net returns of Peaks portfolios

Important to know:

These net returns reflect Peaks portfolios in February 2025, all of 2025, and since the launch of Peaks, after deducting Peaks, fund, and transaction fees. The value of investments can fluctuate, and past performance is no guarantee of future results.

The above figures assume a portfolio value of €10,000 without any deposits or withdrawals. If you made deposits or withdrawals this month, your personal return may differ. Your return will also vary if you have invested less or more than €10,000 due to the monthly fees Peaks charges.

Table 2: Risk of Peaks portfolios

Important to know:

This table shows the risk levels of the four Peaks portfolios over different time periods (last month, this year, and the average since Peaks launched). Risk, also known as volatility, reflects the variation in annualised returns and is measured using the standard deviation of daily net returns converted to an annual basis.

US stock markets in the red

The main cause of the negative returns is the falling stock prices in the United States. This is partly due to the trade war that the US has started with Canada, Mexico and China. President Trump announced import tariffs of 25% on goods from Canada and Mexico, and a 10% tariff on Chinese products. This led to international tensions and countermeasures from the affected countries. Import tariffs do not benefit global trade and have a negative effect on the world economy, causing stock prices to fall. 

In addition, there's less chance that the US Federal Reserve (the Fed) will lower interest rates in the short term, which would be good for share and bond prices. The reason for this is that US inflation rose further from 2.9% to 3.0% on an annual basis. The underlying core inflation (the annualised price increase without volatile food and energy prices) even rose from 3.2% to 3.3%, while analysts had expected a drop to 3.1%. This gives the Fed little room to lower interest rates. The stock markets responded negatively to the inflation figures.

On top of that, other economic figures indicate that the American economy is still robust, which also means less room for interest rate cuts. Producer confidence, for example, rose in February and unemployment fell from 4.1% to 4.0%. Companies such as Apple, Microsoft and Nvidia also posted good quarterly figures, mainly thanks to developments in artificial intelligence (AI).

Stable inflation in Europe

The European economy is not doing as well as the US economy. In February it became clear that the European economy barely grew in the fourth quarter of 2024 (by only 0.1%). The economies of important countries such as Germany and France even shrank. Growth is stagnating.

Lower economic growth does, however, reduce inflation. In February, this fell slightly to 2.4% after four consecutive months of increases. Lower energy prices contributed to this. Falling inflation gives the European Central Bank (ECB) room to further reduce interest rates and thus stimulate economic growth.

The ECB is expected to lower interest rates from 2.75% to 2.5% to support the European economy. This is good for stocks and bonds. It also means that interest rates on the Peaks Interest account will go down by 0.25%.  

Table 3: Net returns of index funds in standard Peaks portfolios

Important to know:

These net returns reflect the performance of index funds in February 2025, all of 2025, and since Peaks launched, after deducting Peaks, fund, and transaction fees. The value of investments can fluctuate, and past performance is no guarantee of future results.

Tense times

If you haven't been investing for very long, the current state of the world can be unsettling. There is a lot going on, from the wars in Gaza and Ukraine and a trade war to the unpredictability of the new American administration. This can make you feel uncertain about the future of your investments. 

The best thing you can do as an investor in such an uncertain situation is to remain calm and keep the long term in mind. These kinds of periods are simply part and parcel of investing. Know that no matter what happened in the past, historically the stock market has always recovered from every crisis. 

During these kinds of periods, it is important to diversify your investments, like with the Peaks portfolios. If you continue to invest regularly when prices are falling, you may even benefit from opportunities. When the stock market drops, you buy at lower prices. And when prices rise again in the future, you benefit from that.