How did the financial markets do?
Equities
- Equities had a good quarter with a positive return. Companies in Europe, the US and emerging markets rose in value.
- The growth of companies working on artificial intelligence (AI) continued, with much of the investment taking place in new data centres. Investors expect developments in AI to drive economic growth and increase corporate earnings.
- Companies in emerging markets also posted positive returns. Companies from Taiwan and South Korea benefited from demand for technology, such as computer chips for investments in AI. There were also better results from companies in other countries, as the economy improved.
- Investment in US companies rose as well, but by less than in Europe and emerging markets. Prices rose more sharply in the US and consumer confidence in the economy declined.
Bonds
- European government bond prices declined, and long-term yields rose. Existing investments in bonds thus declined in value.
- France’s credit rating was downgraded during the past quarter, and investors demanded a higher yield when investing in French government bonds.
- The return on investments in riskier bonds was positive in the past quarter. The risk premium (the extra compensation for this risk) on these bonds declined, causing existing bonds to increase in value. This risk premium has been declining for some time, and was already low compared to previous years.