For years, low interest rates have been investors’ best friend. Because savings at the bank hardly yielded anything due to the low interest rates, much more money went to shares. And that drove the prices up considerably, which in turn yielded a lot of returns for investors.
Last year you earned 28 percent with the AEX index, the leading index of the Amsterdam stock exchange. But this year the AEX index has already fallen by about 15 percent. Only four of the 25 AEX funds are in profit.
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So what about bonds? If interest rates fall, as has been the case in recent years, that is good for bond prices. There will then be a lot of demand for existing bonds, because their interest rates are usually higher than the market interest rate. If it goes up again, that advantage is gone. And then bond prices plummet. on Dutch government bonds lost about 10 percent this year.
Afraid of higher interest rates
Stocks and bonds are underperforming because investors fear that the current high inflation in the eurozone and the US will cause central banks to raise interest rates. Central banks have traditionally tried to combat too high inflation with higher interest rates.
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This has already started in the US and analysts believe that interest rates will be raised even further. Christine Lagarde, CEO of the ECB (European Central Bank), has said it will start raising official interest rates in July.
The tailwind that has benefited investors in shares and bonds for years turns into a headwind, explains RTL Z stock market commentator Jacob Schoenmaker.
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Crypto’s dan?
There is also nothing to earn with crypto coins this year. The price of bitcoin, by far the most important crypto, is now about 40 percent lower than at the beginning of this year.
Bitcoin was sold as the digital gold, but with bitcoin you do not receive compensation such as interest or a share of the profits, says Stan Westerterp, owner of Bond Capital Partners. “With interest rates rising, bitcoin is becoming less attractive.”
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Cash?
Should you have left your money in the bank? Meh, the interest is zero, and if you have more than a hundred thousand in the bank, you even pay 0.5 percent interest. Worse still: your money is worth less because of inflation.
According to our own CBS (Central Bureau of Statistics) one euro was in April 9.6 percent worth less than a year ago.
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Gold and homes
Incidentally, there are investment categories where prices did rise. For example, homes in April were average 13.7 percent more expensive than a year earlier. But yes, buying a house as an investment is not for everyone.
The gold price also rose by almost 1 percent. After the Russian invasion of Ukraine, gold was seen as a safe haven in these uncertain times. And investors also often step into gold when inflation rises.
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energy stocks
Is there nothing left to invest in? The only investment that is doing well now is energy stocks, says Jacob Schoenmaker. In the AEX, for example, Shell is by far the strongest climber this year, with a gain of more than 37 percent.
“But you shouldn’t put all your money into energy companies, because if the sentiment turns, those prices will probably fall again.”
Or insurers
Banks and insurers may also be able to benefit from the higher interest rates, Schoenmaker thinks. For them, in contrast to equities in general, a higher interest rate is just favorable† But if share prices fall, insurers in particular suffer from this, according to Schoenmaker.
It is important that you spread your investments, Schoenmaker warns. Not all eggs in one basket. This means that you cannot avoid investing part of your money in investments that are now being hit hard.
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