Market update summer 2024: prices are falling! Now what?

• After a good June and July, stock markets drop
• US economy cools down faster than expected
• Greater chance of US interest rate cut in September
• Market drops are part of the deal
• Persistence is rewarded

After a good June and July, stock markets drop

In June and July, the stock prices were still nicely on the rise, but investor sentiment suddenly flipped in mid-July. What happened? The US economy, the world's largest, is cooling down faster than expected.

Table 1: Net returns of the Peaks portfolios

Good to know: These are the net returns of the Peaks portfolios for the previous two months, the year-to-date, and since the start of Peaks; after deducting Peaks’ fees, fund costs, and transaction costs. The value of your investment may fluctuate. Past performance is not indicative of future results.

The table above shows returns for a portfolio of €10,000. The returns do not take into account any deposits or withdrawals made during the month. If you have deposited or withdrawn money this month, your personal return will differ from the figures shown above. Additionally, your personal return will vary if you have invested less or more than €10,000 due to the monthly fixed costs charged by Peaks.

Especially in July, prices were quite turbulent. Volatility was a lot higher in that month than in the rest of 2024. 

Table 2: Risk of the four Peaks portfolios

US economy cools down faster than expected

The past few months showed a mixed economic picture. First there was the positive news in July that the US (and also Europe) had a strong second quarter in terms of economic growth (US: +0.7% compared to Q1 and EU +0.6%). This was above what stock market analysts had expected. 

At the same time, other figures indicated that particularly the US economy is cooling. For instance, US prices rose slower than expected and inflation fell in June. Producer confidence and orders for durable goods (such as machinery) also declined quite a bit; these are typical signs that companies are cautious about making large investments. And that, in turn, points to weaker economic growth. 

As a result, stock prices went down in the second half of July. More and more figures confirmed the picture of a cooling economy. Last week, the poor jobs figure in the US was added to this: only 114,000 new jobs were added in July, while analysts had been expecting 175,000 and in June 179,000 new jobs were created. This pushed the unemployment rate up from 4.1% to 4.3%. That's still historically low, but higher than earlier this year. 

Greater chance of US interest rate cut in September

The worse economic figures and lower inflation together increase the likelihood that the US central bank (the ‘Fed’) will cut interest rates on Wednesday 18 September to support the economy. Analysts expect an interest rate cut from 5.5% to 5.0%. 

European Central Bank interest rates are expected to remain unchanged (3.75%). Indeed, inflation is lower in Europe than in the US, although it also rose here last month (while it fell in the US). 

Table 3: Net yields of the index funds included in the Peaks portfolios

Good to know: These are net yields of the index funds in which you invest with Peaks in June 2024, for the entire year 2024, and since the start of Peaks, after deducting Peaks costs, fund costs, and transaction costs. Once the figures for July 2024 are known, we will add them to the table. The value of your investment may fluctuate. Past performance is not indicative of future results.

Market drops are part of the deal

When investing, you don't only get to deal with price rises: sometimes the stock markets go down (temporarily). That is part of the deal. It's not pleasant, of course, and it can make you insecure: ‘Was it really wise of me to start investing?’. 

If doubt strikes, remember that until now stock markets have always recovered from dips. Most recently, this happened after the 2008 financial crisis, after the corona pandemic and after the outbreak of war in Ukraine. The past has seen so many crises - sometimes long, sometimes short - but in the end, stock prices rose as the global economy continued to grow. 

Persistence is rewarded

What's the best thing you can do when the stock markets fall again? See opportunities instead of threats. Think of this period as a time to buy at lower prices, similar to the summer collection sales at clothing shops: you can buy products at lower prices there too. When the stock markets recover at some point (and yes, it can take a long time), you will benefit from the fact that you bought at lower prices. 

So stay calm and keep the long term in mind! Earlier this year, in April, we also experienced a stock market dip. After that, stock prices rose sharply in value. Investors who continued to deposit regularly benefited. They were rewarded for their perseverance!