Mounting risks dictated markets at the beginning of the year, amid a backdrop of ongoing inflationary pressures and tightening of central banks’ monetary policy. In addition, political unrest between Russia and the West and the potential implications for gas supply, also weighed on investor sentiment in the latter part of the month. However, ongoing talks between the West and Russia may see a full-scale confrontation avoided. Performance of some main indices are highlighted below:

Monetary policy woes continue to grip markets, as investors fear the Fed may be delayed in its effort to tame rising inflation. Following the most recent Fed meeting in January, Jay Powell reiterated the view that policymakers may need to raise interest rates as early as Spring 2022, with the possibility of an acceleration of the interest rate hikes anticipated in the December meeting. That said, the Fed also reaffirmed economic conditions are stronger in the US, with corporate balance sheets remaining solid and economic growth above trend levels at 5.5% year-on year.

Similar sentiment has been felt in the UK, as the Bank of England also implemented a tighter monetary policy regime, raising interest rates in December and poised for potentially raising rates for a second time in February. UK inflation reached 5.4% in December, driven by soaring energy prices, though is still expected to ease in the second half of the year, as supply chain disruptions begin to normalise.

Short term market volatility is to be expected, but we believe that global equities are well positioned over the longer term and expect markets to settle down and improve as the year progresses. Credit markets are a strong indicator of economic distress and currently the economic fundamentals remain intact.

Our portfolios moved broadly in line with markets over the course of the month. Focusing on the year ahead, we remain optimistic overall but take the view that heightened investor anxiety will continue to weigh in on investor sentiment.

Portfolios remain well-diversified across both equities and non-equity assets, and our blend of Value, Growth and Quality-oriented equity funds means that portfolios are well positioned to benefit from any style rotation in markets.

Boolers Investment Committee