The past quarter was marked by great uncertainty on the stock markets, as expectations of the first interest rate cuts took centre stage. These expectations were supported by declining inflation figures, especially in the real estate and craft sectors. However, hopes for interest rate cuts were dampened by statements from some central bankers who even held out the prospect of further rate hikes.

The Federal Reserve (FED) clearly positioned itself last week by declaring the current cycle of interest rate hikes complete. Nevertheless, the FED has not given a concrete time frame for the first interest rate cuts. This news weighed on global markets, especially European stock indices and the US Nasdaq, which fell from their sideways movements of recent months.

Despite these uncertainties, the upward trend of the S&P500, which began in September 2022, remains intact. The recent correction is seen as a temporary setback in a broad upward trend for 2023/24.

The expectation is that central banks, including the European Central Bank (ECB), will not raise interest rates further, and clearer signals of rate cuts are expected later in the fourth quarter of 2023. This should further support the equity markets and prices are expected to rise significantly by the end of the year. The EUR/USD currency pair experienced a decline last month in August, closing the month at around 1.08 EUR/USD. This decline can be attributed to the robust economic data in the US which makes an interest rate cut by the US Federal Reserve less likely in the near future. The positive economic data in the US means that the prospects of an interest rate cut by the Fed are diminishing. This leads to a continuation of the positive interest rate differential between the USA and Europe. There is also speculation that the European Central Bank (ECB) could pause on interest rates in September. The interest rate differential between the two currency areas has a significant impact on the foreign exchange market. Higher interest rates in a currency area can increase the attractiveness of that currency and lead to an increase in the currency exchange rate. In this case, the positive interest rate differential could help support the value of the US dollar against the euro and thus explain the decline in the EUR/USD currency pair.

In LiLux Convert, the following convertible bonds POSCO Holdings, ENI and Prysmian were sold in the past three months with price gains between 0.9 % and 24.4 %. The fund closed the 3rd quarter with a positive performance of 1.65 %.