Affinity Market Commentary – March 2022

GLOBAL MARKETS

Global markets experience heightened volatility after Russia’s invasion of Ukraine

Markets sentiment driven by fears for how the war will develop, and the impact on energy prices, commodities

US MARKETS

Technology lower, while rotation into value continues

The rotation from growth into value persisted amid growing volatility. Technology was lower overall, despite some strong days. High intra-day volatility continued throughout the month, and particularly following the Russian invasion of Ukraine on 24th February. Aside from the knee-jerk reaction to this event, economic data was generally supportive. Despite CPI inflation rising to 7.5%, improving house prices, consumer spending and 4% unemployment, coupled with expected record earnings growth of 8.7%, helped to cushion the US market from the shocks being felt across the world from the Ukraine situation.

Down -3.1% (US 500)

EUROPEAN MARKETS

Exposure to Russia and Ukraine weighing on the markets

The worst performing of the major markets, being shunned by investors nervous about the dependence of Europe on Russian oil and gas, and the possible spill-over from the conflict in Ukraine. As in January, EU stocks began the month well, with a 1% rally. Economic indicators remained robust, with the composite PMI up to 55.8 from 52.3 in January, and a rebound in the tourism industry, following the easing of many COVID restrictions. However, sanctions imposed on Russia, and the suspension of approval of Nord Stream 2 by Germany weighed heavily on EU shares.

Down -3.4% (Euro 600 Index)

UK MARKETS

FTSE 100 holding firm

Returns were dominated again by large-cap companies, with the FTSE 100 largely flat. Continuing falls were seen, however, in the mid and small-cap indices, which were both down by more than 3%. The All Share Index, which is dominated by the FTSE 100, sustained only a modest fall during the month, as the UK market has a high exposure to oil and resources stocks, which continued to be driven higher by events in Ukraine. The UK market continues to be the best of the major equity markets so far this year.

Down -0.8% (UK All Share)

ASIAN MARKETS

Fell on the prospect of higher commodity prices

Although falls in Japan were contained, the wider Asian region saw a larger decline, driven by falls in China, Hong Kong and India, where sentiment was hit by the war in Ukraine. Malaysia, Indonesia and Thailand recorded gains for the month, but these were more than offset by the falls seen in the larger markets, where a combination of investor nerves and higher commodity prices drove shares lower. China, seen as Russia’s main supporter, abstained from voting on the UN resolution to tell Russia to stop its invasion, but has not joined in with sanctions.

Down -2.1% (Asia Index)

DISCLAIMER – The value of investments and the income from them can go down as well as up and past performance is not a guide to future performance. Returns are in local currency unless indicated otherwise. Source: Bloomberg.

 

 

Key Points:

  • Energy prices continued to rise as the expected Russian invasion of Ukraine began on 24th February
  • Markets weakened on fears for how the war will develop, and the effect on the west of higher energy prices and sanctions against Russia
  • Corporate earnings remained generally robust, with earnings growth of 8.7% forecast in the US this year
  • Emerging markets were mixed, but the Index was dragged lower by poor performances from its largest constituents, China and India. Russia is a very small part of the EM indices, and will shortly be removed
  • Whilst many markets look relatively fairly valued after recent falls, intra-day volatility has increased dramatically, creating a more risk-off mindset for many investors

 

DISCLAIMER – The value of investments and the income from them can go down as well as up and past performance is not a guide to future performance. Returns are in local currency unless indicated otherwise. Source: Bloomberg.

 

Key Points

  • Sterling fell slightly against the dollar and yen, the traditional safe-haven currencies, as investors adopted a risk-off mindset
  • Having reached a 2-year high against the Euro in January, the pound retreated slightly, as rate rises appeared less likely in the short term
  • The dollar edged higher once again, as investors adopted a risk-off mindset, and US sanctions against Russia prevented the latter from deploying foreign reserves
  • Eurozone inflation rose slightly to 5.1% in February, and the ECB failed to rule out a rate rise to combat it, lending some support to the euro
  • The yen rose in line with the dollar, benefiting from global uncertainty in the second half of the month

 

DISCLAIMER – The value of investments and the income from them can go down as well as up and past performance is not a guide to future performance. Returns are in local currency unless indicated otherwise. Source: Bloomberg.

 

Key Points

  • Bond market volatility increased as investors digested an increasing inflationary environment coupled with the impact of the Russian invasion of Ukraine
  • Sovereign bonds continued to perform better than their high yield counterparts, as investors preferred the safety of government issues and credit spreads widened
  • UK gilts fell by another 1.4%, making a loss of 5.2% so far this year, as investors continued to contemplate high inflation and looming rate rises
  • Yields rose sharply early in the month on the Bank of England rate rise, and hawkish rhetoric elsewhere. They then declined mid-month, and continued to fall in the days following the invasion

 

DISCLAIMER – The value of investments and the income from them can go down as well as up and past performance is not a guide to future performance. Returns are in local currency unless indicated otherwise. Source: Bloomberg.

 

Disclaimer: The information contained in this report is for illustrative purposes only and should not be construed as a solicitation nor offer, nor recommendation to acquire or dispose of any investment. Specifically, the share class used to create the illustrations may not be available on all platforms nor be suitable for individual investors. This report was produced by Collidr Research (“Collidr”) for Affinity Integrated Wealth Management (AIWM) and while AIWM and Collidr use reasonable efforts to obtain information from sources which they believe to be reliable, neither AIWM nor Collidr make any representation that the information or opinions contained in this report are accurate, reliable or complete. The information and opinions contained in this report are subject to change without notice. Model returns are calculated using the most appropriate share class of the underlying funds, having regard to the illustrative nature of the report, with all income being reinvested. As a result, real portfolio performance may vary from model performance. Where model portfolio histories are shorter than three years, historic model returns are substituted prior to inception date with returns from an Collidr performance benchmark. This benchmark is constructed from the average returns of all Collidr portfolios with similar risk profiles that existed during that time. The value of investments and the income from them can go down as well as up and past performance is not a guide to the future performance. Affinity Integrated Wealth Management is a trading style of Buryfield Grange Limited, Buryfield Grange Life Planning Limited and Affinity Integrated Wealth Management Ltd. ‘Buryfield Grange Limited’ is authorised and regulated by The Financial Conduct Authority. Not all services provided by Buryfield Grange are regulated by the Financial Conduct Authority. ‘Buryfield Grange Limited’ is registered in England and Wales at Inspire House, 20 Tonbridge Road, Maidstone, Kent, ME16 8RT. Company  registration number 4568338. Collidr Research is a trading name of Collidr Technologies Limited, registered in England and Wales at 34 Southwark Bridge Road, London, SE1 9EU. Company registration number 09061794. Data Providers: Bloomberg L.P. and Collidr.

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