Deep Dive – How interest rates and a narrow stock market are widening the discount on holding companies

In September, the bond market set the tone on the stock markets. The United States delivered strong figures, including a sizeable increase in the number of jobs and purchasing managers' surveys pointing to a fast-growing economy. As a result, investors increasingly priced in a stricter Federal Reserve policy, which raised interest rates halfway through the month for the first time in three years. The conflict surrounding Iran has by now lasted more than six months and kept inflation concerns alive as well. The US ten-year yield rose by 0.54 percentage point in September to 5.29%. That was the largest monthly increase since 2022 and a level not seen since the financial crisis. You can read our in-depth analysis in Economy & Markets #36 and Economy & Markets #38.

At the same time, the US stock market is leaning ever more heavily on a handful of AI companies, while most other shares trade well below their record prices. Both developments are weighing on the share prices of our holding companies, even though their corporate news gives little cause for concern. Partner Michael Gielkens discussed some of these themes as a guest on De Beursvoyeurs, the investment podcast of the Belgian business newspaper De Tijd. Below, we explain why interest rates hit holding companies particularly hard, why the discount to intrinsic value is widening, and which risks we see around AI. We also explain why, like Warren Buffett around 2000, we are sticking to our fundamentals.

This article was originally written in Dutch and automatically translated into English with the help of AI. In case of any difference, the Dutch original prevails.