Interest rate markets 2025: challenges and opportunities for retail investors

Hello everyone,

The year 2025 will bring exciting developments on the financial markets, particularly with regard to the interest rate markets. Since the sharp rise in interest rates in recent years, many investors are faced with the question of how they can best position themselves in this environment. For retail investors - i.e. private investors - it is particularly important to understand the impact of these changes and adapt their own investment strategy accordingly.

What is happening on the interest rate markets?

Global central banks, led by the US Federal Reserve (Fed) and the European Central Bank (ECB), have raised key interest rates sharply in 2023 and 2024 to combat stubbornly high inflation. This trend appears to be slowing in 2025, but interest rates remain at a high level. For investors, this means that Money has become more expensive, credit is harder to access and low-risk investment opportunities such as government bonds and savings accounts are once again offering attractive returns.

In the USA, the key interest rate is currently above 5%, which is having an impact on the real estate and consumer sectors in particular. Interest rates have also risen in Europe, albeit not quite as sharply. For retail investors, who often invest in ETFs, individual shares or real estate, this is a double-edged sword: On the one hand, new opportunities are opening up; on the other, old strategies are being put to the test.

Opportunities in a high interest rate environment

1.Fixed-interest securities

Bonds are a clear winner of the interest rate turnaround. For years, government and corporate bonds were unattractive to many investors as yields were low. Now the tide has turned: Short-dated US government bonds currently offer yields of 4-5%, making them a solid alternative for safety-conscious investors. Corporate bonds from established companies could also offer interesting opportunities, although the creditworthiness of the issuer should be checked carefully.

2.Dividend shares

High-dividend companies remain attractive, especially if their payouts are higher than the inflation rate and bond yields. Sectors such as utilities, consumer staples and healthcare are often less sensitive to interest rates and offer long-term stability. Companies such as Procter & Gamble $PG (-0,1%) or Johnson & Johnson $JNJ (-0,23%) could be a good choice for income investors in 2025.

3.Overnight and fixed-term deposits

Retail investors looking for low-risk opportunities are also benefiting. Banks are once again offering higher interest rates on call money accounts and fixed-term deposits. Surplus liquidity can be parked here in the short term without taking major risks.

Challenges for retail investors

However, a high interest rate environment also entails considerable risks:

1.Equity valuations under pressure

Higher interest rates often mean that the future cash flows of companies - especially growth companies - are worth less. This leads to falling share prices in interest-sensitive sectors such as technology or real estate. Retail investors who are heavily invested in tech stocks must be prepared for volatility.

2.Rising borrowing costs

The environment has become more difficult for private investors who rely on loans, for example to buy real estate. Mortgage interest rates have risen sharply, making real estate unaffordable for many. Anyone who already has real estate financing should check how interest rate adjustments affect monthly costs.

3.Inflation risk remains

Although inflation has fallen, it remains a factor. Retail investors must ensure that their returns remain positive after deducting inflation to avoid real asset losses.

Strategies for retail investors

1.DiversificationIn an uncertain environment, it is more important than ever to diversify your portfolio. Combine low-risk investments such as bonds with growth stocks or dividend stocks.

2.Secure liquidityIn view of the rising cost of living, it is advisable to keep sufficient liquidity in a call money account.

3.Long-term perspectiveDespite the uncertainties, retail investors should stick to their long-term strategy and not panic. Market cycles come and go - patience pays off.

My question to you

How are you adapting your investment strategy to the high interest rates? Are you focusing more on bonds, or are you staying loyal to equities? And how are you planning to deal with potential interest rate charges?

I look forward to your opinions and strategies in the comments!

Kiss,

RoboLarry

Johnson & Johnson $JNJ (-0,23%) said Tuesday that its chemotherapy-free combination treatment has shown significant improvement in extending the lives of patients with a type of lung cancer compared to AstraZeneca's blockbuster drug Tagrisso.

The combination of J&J's cancer drugs Rybrevant and lazertinib, which was approved in August for previously untreated patients with non-small cell lung cancer (NSCLC) with an EGFR mutation, showed a statistically significant improvement in median overall survival, meeting an important secondary objective of a late-stage trial.

However, the company did not provide specific details on the life extension compared to AstraZeneca's Tagrisso, which extended the lives of such NSCLC patients by an average of 38.6 months in a separate study.

J&J said it will announce the details of the Tagrisso portion of its study at an upcoming medical meeting and also plans to share full overall survival data with health authorities.

"We expect an improvement in median overall survival of more than one year," said Mark Wildgust, who heads global medical affairs for oncology at J&J.

"We will increase median overall survival to over four years," he added.

Some analysts have previously pointed out that doctors may prefer single-agent therapy to combination therapy for previously untreated patients, but better survival could tip the scales in their favor.

"Physicians are always looking for the best option up front, and when they define what the best option is, they look at the overall survival rate they give their patients," said Biljana Naumovic, who leads commercial strategy for cancer treatments at J&J.

Non-small cell lung cancer (NSCLC) is the most common form of lung cancer, and the EGFR mutation occurs in 10-15% of cases in the United States, according to the American Lung Association.

Should be sold again at approx. 10% growth. I have about 14 such swing trade positions next to my hodl stocks.

Part 4 of 5: During part 1 and 2 were my apprenticeship years on the stock exchange, Part Part 3 highlighted the very positive years 2019-2021. In part 4 it is now the turn of 2022 and 2023. Part 5 will then conclude my investor story (so far) and shed light on 2024.

2021 was an extremely positive year with a performance of over 30% and assets of almost €200,000 at the end of the year.

However, from mid-2021 onwards, you could already sense that something was slowly changing. Inflation has picked up significantly worldwide. The main reasons for this are the global supply chain problems and the massive money printing by the central banks. Both are direct consequences of the coronavirus pandemic.

The year 2022 - inflation & interest rate turnaround

The year 2022 began with a significant setback in January. My portfolio was down 8% in January. There was a lot of unrest on the markets, inflation was still far too high and it was not clear how much the Fed would raise interest rates. In addition, there were fears that Russia could invade Ukraine - four weeks later this was unfortunately a sad certainty.

Uncertainty - something that the markets do not like at all. In addition to inflation, the war in Ukraine suddenly created another risk: what impact will the war and the sanctions have on global supply chains, which are still under heavy strain? Will this

inflation even further and thus put even more pressure on the central banks?

The stock market was therefore under fire from all sides:

• Supply chains are weighing on companies
• Higher interest rates lead to higher interest costs for companies
• Higher inflation increases salary and purchasing costs, while sales fall as consumers (have to) save more
• Suddenly, call money accounts and bonds become more interesting again and there are alternatives to shares (TINA = there is no alternative was therefore off the table)

Above all tech and growth stocks suffered from further problems:

Many growth companies were not yet profitable, but could borrow money cheaply from anywhere - profits were irrelevant as long as sales were growing. By 2022, this had changed and unprofitable companies were even shunned. Another reason is the valuation of future profits. If inflation is 0%, profits will be worth the same in five years' time as they are today. If inflation is 5%, I have to discount the profit in five years at 5% and suddenly the profit in five years is worth much less in real terms.

If I invest in my portfolio 2022 there are only a few winners:

At the top were defense companies like Lockheed Martin $LMT (+0,06%)

and Northrop Grumman $NOC (+0,42%) . This was followed by safe-haven stocks like Pepsi $PEP (+0,13%)
Unilever $ULVR (+0%) or Johnson & Johnson $JNJ (-0,23%) Also Encavis $ECV (+0,03%) was also in demand as an electricity producer due to the lack of gas from Russia.

At the bottom was everything to do with tech had to do with technology. The hardest hit were the unprofitable tech companies like Teladoc Health $TDOC (+0,47%) or Match Group $MTCH (-0,5%) caught - both with 70% losses each.

But also Meta $META (-0,03%)
had price losses of 60%! The reason was not only the general situation but also the lack of faith in the Metaverseso that Meta also had an internal problem. In 2022, Meta was already counted as the next GE or IBM.

But also NVIDIA
$NVDA (+0,64%) also lost -45% got a good beating. Microsoft $MSFT (+0,12%)
Apple $AAPL (+0,1%) and Alphabet $GOOG (+0,06%) saw their share prices fall by -20 to -35% were also unable to escape.

What has me in the year 2022 keep going in 2022?

On the one hand, the thought that I can now buy many top companies much more cheaply, but on the other hand also the dividends. My dividends increased by almost 50% in 2022 compared to 2021 and at the end of the year I had dividends of over €1,800.

That's an average of €150 per month and that's with dividend growth companies and not high-dividend ETFs or similar.

Nevertheless, the statement at the end of the year didn't exactly look rosy. Having started with €193,000, at the end of 2022 the portfolio only stood at 178.000€ even though I had over 30.000€ invested. Price losses of ~€45,000 hit like a bomb.

After another slap in the face in December 2022 with -5%, everything should suddenly be forgotten at the turn of the year.

The year 2023 - Inflation, high interest rates? Never mind, we have AI!

On November 30, 2022, the world ChatGPT and since then we have been in an AI rallythat still has no end in sight at the end of 2024. The performance of the portfolio has turned 180 degrees. Everything that was at the top in 2022, such as pharma or consumer staples (Procter & Gamble, Pepsi,...) was suddenly at the bottom.

Suddenly at the top were NVIDIA and Meta with almost +200%.

With Crowdstrike, Salesforce and Palo Alto Networks there were

another three doublers in the portfolio. One Apple was with +40% already

rather a low performer.

The stock market got used to the normalized interest rate environment, supply chains were relatively intact again and inflation began to fall. All in all, a positive environment for the stock market, which was driven back up by a megatrend (artificial intelligence).

On the home stretch in December 2023, my portfolio was just about able to make up for all the price losses from 2022. In addition to price gains of ~€45,000, I also invested another ~€30,000, so that my portfolio increased by ~€75,000 in absolute terms.

My portfolio ended the year at ~178.000€ and at just over 250.000€ ended the year.

The dividends have also continued to rise nicely - from 1.900€

to almost 2.400€ upwards.

Asset development & return:

Year Deposit value Return

2022 179.000€ -21%

2023 252.000€ +24%

Vermögensentwicklung 2022-2023:

Outlook:

Vermögensentwicklung 2013-2023:

Outlook:

In the next part, I will look ahead to the year 2024 and thus also my portfolio update / annual overview cover.

The year 2024 continued to be characterized by AI, but also by falling interest rates and some political upheavals (Trump, traffic lights out,...).

The portfolio continued to perform extremely well in 2024, although the savings rate was lower than in previous years due to a number of private issues. Nevertheless, for the first time the 300.000€ in the portfolio was to be significantly exceeded.

Part 1: https://app.getquin.com/de/activity/PElWrODsmV

Part 2: https://app.getquin.com/de/activity/LUkWiLtZKX

Part 3: https://app.getquin.com/de/activity/mQAzDvfidK

#strategy

#personalstrategy

#etfs

#dividends

My portfolio shows a breakdown into different sectors and areas:

trade Republic: the shares and ETFs

scalable Capital : the gold

This is just the portfolio I want to hold for the next few years with a long-term savings plan. And if necessary, individual purchases where the opportunity arises, I think I am now quite well positioned or what do you think of the portfolio.

Stocks that I would like to hold for the long term

• Technology:
• 
  $MSFT (+0,12%) Microsoft,
• $AAPL (+0,1%) Apple,
• $ASML (-0,03%) ASML

• Consumer goods:
• $KO (+0,14%) Coca-Cola,
• $MCD (-0,05%) McDonald's.

• Finance and insurance:
• $ALV (+0%) Allianz,
• $V (-0,1%) Visa

• Real Estate:
• $O (+0,11%) Realty Income.

• Armor:
• $LMT (+0,06%) Lockheed Martin.

• Retail:
• $WMT (-0,22%) Walmart.

- Various sectors:

- $8001 (+0,82%) Itochu

- Health

$JNJ (-0,23%) Johnson & Johnson

ETF as core overlaps are relatively unimportant to me in this area :)

- FTSE All World :

$VWRL (+0,01%)

-Global Quality Income:

$FGEQ (+0,16%)

and then as a supplement

$BTC (-2,07%) bitcoin

and gold $EWG2 (+0%)

Depot optimization: Your feedback is needed!

Hello everyone,

I am currently working on optimizing my portfolio with a clear focus on dividend growth and a broader diversification. The plan is to include companies that offer solid long-term dividend growth and at the same time cover different sectors.

The stocks I am currently considering include $JNJ (-0,23%)
Johnson & Johnson (strong market position in the healthcare sector, dividend aristocrat) and $SBUX (+0,03%)
Starbucks (fast-growing company in the consumer goods sector with solid dividend potential). Both companies fit well into my strategy, but I am still looking for other interesting stocks to add to my portfolio.

What can you think of? Which companies with a similarly stable dividend policy and good growth prospects do you have on your radar? I would be particularly interested in suggestions from less obvious sectors or with geographical diversification.

Looking forward to your suggestions and the exchange!