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The second quarter of 2024 was again favorable for global equity indices, while fixed income markets continued to struggle. Commodities also generally rose during the quarter.
Since the beginning of the year, the equity component of portfolios has been the best performing. The strength in equity markets was quite unexpected by most commentators, who predicted that economies would slow as central banks raised interest rates.
But corporate earnings remained fairly solid, especially for the technology sector, and this pushed the indices to new highs, with US markets again leading the way higher.
European and Chinese stock markets staged a rally versus the US in the spring, before slowing again at the end of the quarter.
For the Chinese market, it was weak domestic demand and fears of new tariffs from the US and Europe that have impacted its performance.
European markets underperformed again after the European elections, in which right-wing parties performed very well in some important countries such as France, Germany, and Italy.
This pushed French President Macron to unexpectedly call new legislative elections in which the right-wing Rassemblement National party won in the first round, but then, in the second round, the New Popular Front became the largest bloc in the assembly.
Both the right-wing and left-wing programs imply further increases in the public deficit, and this was reflected in the selling pressure on both public debt and stocks. For the time being, the political situation in France is frozen until the end of the summer, as the formation of a coalition government looks extremely problematic.
On the positive side, it seems that the inflation deceleration process continues, and the ECB started its rate cut cycle, while the FED is likely to do so in September.
The focus of investors and central banks is shifting from inflation to consumption, as consumption appears to be slowing as the excess savings accumulated during the pandemic have been depleted. The labor market is also cooling, with slowly rising unemployment in the United States.
In the U.S. at the moment, Trump appears to be leading the presidential race, especially after the failed assassination attempt in Pennsylvania further boosted his popularity. The current consensus view is that his election could be inflationary due to the announced tariff increases and tax cuts, but we saw in 2016 how much these forecasts can be misleading, until the programs are effectively implemented.
Performance of our indexed fund portfolios for the first half of 2024
All of our diversified portfolios of index funds and ETFs are positive so far in 2024. Diversified portfolios are portfolios for investors who want to invest for the long term. The broad diversification they provide in terms of exposure to different asset classes helps make them resilient to most market conditions. Recently, we also introduced the Savings portfolios and a full range of bond portfolios that are specific to investors who have shorter time horizons or have a specific preference for bonds.
The performance of all Index Funds portfolios in line with what happened in the markets has been exceptional and ranged from 1.6% to 11.5% in the first half of 2024, with an average of 6.3%, compared to an average return of 3.8% for Spanish mutual funds as a whole, as reported by Inverco. In other words, on average, our portfolios have outperformed by 2.5 percentage points.
Performance of our ETF portfolios for the first half of 2024
Diversified portfolios can be constructed with both index funds and ETFs. The level of risk and exposure for the corresponding profiles is similar, but performance may be slightly different, as the availability of investment vehicles is not exactly the same.
For ETF portfolios, returns averaged between 1.3% and 10.4% for an average of 5.7%.
Comparative performance of the different inbestMe portfolios for the first half of 2024
In the first half of 2024, the average return of all inbestMe portfolios was 5% or 1.25 percentage points above the average weighted return of mutual funds in Spain (according to Inverco).
The best performing portfolios have been the Standard Index Fund portfolios, achieving 6.3% on average (1.3 points above average).
This was followed by the Standard Pension Plan portfolios, which showed an impressive return of 5.9% on average, outperforming the average by 0.9 percentage points.
SRI portfolios have generally been the worst performers due to the fact that ESG funds have had a worse relative performance during this first half of the year.
We remind you that if you want to see more details about the performance of our portfolios (in this period or in others and for all types of portfolios and risk profiles) you can consult the inbestMe performance page on our website where you will find the comparison with other benchmarks and risk ratios such as volatility, Sharpe Ratio and drawdown for the different periods.
We have extended the functionality of this chart, and have also added the latest portfolios introduced: target portfolios and bond portfolios (or fixed income).
Accumulated yields and APRs at the end of June 2024
In the graph below we see a comparison of all the profiles of our portfolios compared to the different categories of the Inverco statistics of mutual funds in Spain, from 2017 to the end of the first half of 2024, so that we can compare our portfolios with mutual funds that cover the same asset class and have a similar risk profile. The cumulative return ranges from 5.4% for profile 1 to 84.4% for profile 10.
On average, our portfolios achieve a cumulative return of 43.6% versus 13.4% for inverco, which is 30.2 percentage points higher.
This translates into an average annualized return (AER) for our portfolios of 4.7%. This is well above the average for Spanish mutual funds (1.6%) and, for each risk profile, returns are well above their respective benchmark, meaning that both low-risk and high-risk portfolios outperform the average of their comparable mutual funds.
On average, our portfolios achieve an annualized return of 4.7% (AER) versus Inverco’s 1.6%, which is 3.1 percentage points higher.
Accumulated returns of the average investor profile on inbestMe
At inbestMe, the average investor profile is 7 (7/10)*. This average investor profile has remained almost unchanged over time since we started our activity.
In the graph above on the left we see how the average investor profile of inbestMe has obtained a 57% cumulative return from 1/1/2017 to 6/30/2024, or 43 percentage points more than the “Mixed Variable Income” category according to Inverco which in the same period is 14%.
On the right we see how the average investor profile inbestMe obtains an annualized return (APR) of 6.2% which is 4.4 percentage points more than the category “Mixed Variable Income” according to Inverco which in the same period is 1.8%.
* To make this calculation, we weighted the weight of the number of “investor” clients per profile over the total. For this we consider the different index fund profiles ranging from 1 to 10. The calculation of the average investor profile excludes savings, target, and bond portfolios.