Market Update July 2023: Peaks Portfolios Continue to Rise

In this market update, you will find:

• Positive month for the Peaks portfolios
• European Central Bank expects further interest rate hikes
• Robust job market in the USA

Positive month for the Peaks portfolios

The positive trend in the Peaks portfolios continued in June. All portfolios achieved positive returns, with increases ranging from +0.8 percent to +2.8 percent. One reason for this was the strong performance in the US stock markets (see Table 3). Tech giants like Microsoft, Apple, and Tesla, in particular, were among the big winners once again.

Table 1: Net returns of the Peaks portfolios

Good to know: These are the net returns of the Peaks portfolios for the previous month, 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 If you have deposited or withdrawn money this month, your personal return will differ from the figures shown above.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.

The volatility (risk) of the Peaks portfolios slightly decreased in June compared to the previous month, while stock prices increased. Volatility measures the fluctuations of a portfolio within a specific period. The higher the volatility, the stronger the fluctuations, and the riskier the investment.

 Table 2: Risk of the four Peaks portfolios

Good to know: Here you can see the risk of the four Peaks portfolios over different time periods (last month, year-to-date, and average since the start of Peaks). Risk represents the annualized fluctuation in return and is also referred to as "volatility.". Risk is measured by calculating the standard deviation of the daily net returns of the Peaks portfolios and converting that number to an annual basis.

European Central Bank anticipates further interest rate hikes

In the last month, the European Central Bank (ECB) increased the benchmark interest rate in the Eurozone by 0.25 percentage points. As a result, the central interest rate (main refinancing rate) at which commercial banks can borrow money from the ECB now stands at 4 percent. With this interest rate step, the ECB has increased its benchmark rates for the eighth consecutive time since July 2022. Additionally, the so-called deposit rate for banks that park their money with the ECB also rose from 3.25 to 3.50 percent.

During a central bank meeting last month, ECB President Lagarde already indicated that there would be another interest rate hike in July. This is mainly due to the inflationary development entering a second phase, which necessitates further action. One reason is the high profits of companies that have increased their prices significantly more than required by the rising costs. Additionally, rising wage increases and salaries contribute to this decision.

Robust job market in the USA

In the USA, the Federal Reserve (Fed) recently took a pause and did not raise interest rates in June. The benchmark interest rate range of 5.0 to 5.25 percent was maintained. However, there are signs of a potential increase again in the USA: Although fewer jobs were created in June than expected, the job market in the USA remains very strong.

Job growth continues to surpass the threshold required for stable labour market conditions due to population growth. Additionally, unemployment has decreased, while wages continue to rise, fuelling inflation.

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 May 2023, for the entire year 2023, and since the start of Peaks, after deducting Peaks costs, fund costs, and transaction costs. The value of your investment may fluctuate. Past performance is not indicative of future results.

Investing always involves risks. Know that you could lose (a part of) your invested money.