Market Update October 2023: Turbulent Markets

In this Market Update, you will find:

• Performance of the Peaks Portfolios 
• The Federal Reserve Keeps Interest Rates at a High 
• European Central Bank Raises Interest Rates 
• Maintaining Composure in Uncertain Times

Performance of the Peaks Portfolios 

Despite recent developments and the outbreak of a new conflict in Israel and Gaza, we would like to inform you about what happened in the markets in September.

The stock markets remained rather turbulent last month. After small ups and downs, the Peaks portfolios ended the month with negative returns. However, throughout the year 2023 so far, all Peaks portfolios are still clearly in positive territory, with a maximum of +10.9% for the "Adventurous" portfolio.

Table 1: Net returns of the Peaks portfolios

Peaks portfolio	Return September	Return 2023	Average yearly return since start of Peaks	Return since start of Peaks
Cautious	-1.6 %	+4.2 %	+1.1 %	+6.7 %
Balanced	-1.7 %	+6.3 %	+3.3 %	+20.8 %
Ambitious	-1.9 %	+8.6 %	+5.5 %	+36.5 %
Adventurous	-2.0 %	+10.9 %	+7.5 %	+53.1 %

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 If you have deposited or withdrawn money this month, your personal return will differ from the figures shown above.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 remained largely the same in September as in the previous month, with only a few deviations. Volatility measures the fluctuations of a portfolio over time. The higher the volatility, the greater the fluctuations, and the riskier the investment.

 Table 2: Risk of the four Peaks portfolios

Risk (volatility)	September	2023	Average annualized volatility since start of Peaks
Cautious	+5.2 %	+5.0 %	+5.8 %
Balanced	+6.2 %	+6.0 %	+7.7 %
Ambitious	+7.5 %	+7.5 %	+10.1 %
Adventurous	+9.0 %	+9.3 %	+12.6 %

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.

The Federal Reserve Keeps Interest Rates at a High 

Level Last month, the Federal Reserve (Fed) announced that it would maintain the interest rates at a high level – in the range of 5.25 to 5.5 percent. This rate allows commercial banks to borrow money from the central bank. Additionally, they released a new economic forecast indicating that another interest rate hike could be on the horizon later this year, and that interest rates in the coming year might be higher than previously expected.

The Fed's actions are driven by persistently high consumer prices. The inflation rate had surged to over nine percent last year before gradually declining. According to the US government, consumer prices rose by 3.7 percent in August compared to the same month the previous year. In the medium term, the Fed aims for price stability with an inflation rate of 2 percent.

European Central Bank Raises Interest Rates 

In September, the European Central Bank (ECB) increased the benchmark interest rate by another 0.25 percentage points to 4.5 percent. Likewise, the key deposit rate, which banks receive for parking excess funds in the financial markets, also rose from 3.75 to 4.00 percent.

As a result, interest rates on the Peaks Interest Account increased once again. Depending on your Peaks package, you can now earn up to 3.63 percent interest on your money. You can easily add the Peaks Interest Account in your Peaks app.

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

	ISIN	Return July	Return 2023	Return since start of Peaks
Equity funds
North America	LU0629460089	-2.3 %	+19.6 %	+103.4 %
Europe	IE00B52VJ196	-2.6 %	+7.1 %	+44.8 %
Asia Pacific	LU0629460832	+1.0 %	+5.8 %	+19.9 %
Emerging markets	IE00BYVJRP78	-1.8 %	-3.4 %	+9.9 %
Bond funds
European Government bonds	IE00B4WXJJ64	-1.8 %	+1.0 %	-10.9 %
European Corporate bonds	LU0484968812	-0.1 %	+2.2 %	-10.6 %

Good to know: These are net yields of the index funds in which you invest with Peaks in September 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.

Maintaining Composure in Uncertain Times

As mentioned earlier, the world has changed significantly since the outbreak of the serious conflict in Israel and Gaza on October 7th. These intense events not only unsettle the world, but also the financial markets – and this will be reflected in your Peaks app this month.

Uncertain times naturally bring anxiety to investors as well, and you might be wondering whether to continue investing. Ultimately, this decision is up to you, but be aware that selling investments during a "downturn" is generally considered a bad idea. It's often best to think long-term and remain calm, as history has shown that stock markets have recovered from every crisis. If you have faith that the unrest will eventually subside, then simply continue with what you've been working on in the past: building your financial future.

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