Market Commentary 1 January - 31 March 2022
Over the start of the new calendar year, markets have had to deal with uncertainties with Russia’s invasion of Ukraine, triggering soaring commodity prices especially oil and gas. Given Ukraine is an agricultural powerhouse, supplies of wheat, corn and sunflower oil have also been impacted. This conflict has magnified existing supply chain disruptions and added further unwanted impetus to surging global inflation. Elsewhere, the Chinese market was negatively affected by renewed Covid-19 outbreaks in the region, leading to new lockdowns in several major Chinese cities. Market turbulence, as unpleasant as it is, will eventually ease. Despite some of the market weakness seen over the last three to six months, annual returns have been resilient for portfolios with at least half invested in shares.
Despite the apparent relative calmness of the markets’ response to date, the potential medium and long-term outcomes from the conflict and the pandemic are far from over and remain difficult to forecast. What is clear however, is the stated desires from all central banks and governments around the world to continue to ease back on the stimulatory policies of the last two years, by progressively lifting interest rates and reducing fiscal support. Navigating through the many implications of these ongoing headwinds is the single biggest challenge ahead for businesses, consumers, and investors.
So, what to do? Maintain perspective and stay patient. Uncertainty is a constant. We don’t know what the weather will be next week, and we certainly don’t know what will affect global factors such as the current conflict in Ukraine, global travel and trade, supply chain pressures, concerns about inflation or the ongoing evolution of Covid-19. What we do know, is that all these unknowns are factored into market prices. Even though we may not know when or how, history tells us categorically that conflicts end, pandemics run their course, consumerism & trade generally flourish, and inflation is more commonly able to be controlled within targeted ranges. We don’t see anything in the world to suggest that this time is any different.
As always, your financial adviser is available to discuss any changes to your personal financial plan and answer your queries.