How did the financial markets do?
Equities
- Overall, equity markets had a strong quarter. Most markets closed the quarter higher than they started it.
- AI companies contributed most to the increase. The computer chip industry and large technology companies generated high returns. As a result, US equities, in particular, achieved a positive return of approximately 8%.
- Europe also ended the quarter higher, but with a smaller increase than the US. This was due to lower investment in AI and weaker economic growth. As a result, returns lagged behind those of the US.
- Emerging market equities also benefited from the increase in AI investments. Taiwan and South Korea in particular saw strong price gains due to the growth of the computer chip industry.
Bonds
- In Europe, inflation has fallen to a normal level. The European Central Bank (the ECB) has therefore not had to raise or lower interest rates. As a result, interest rates remained fairly stable and safe bonds did not change much in price either.
- Yields on European government bonds remained broadly the same, except in France, where high public debt and political uncertainty led investors to demand higher yields. This could reduce the prices of existing bonds.
- Risk premiums for riskier bonds, such as in emerging markets, have on the other hand decreased. The prices of these bonds accordingly rose, generating positive returns.