1st Quarter Market Update

I hope that this update finds you keeping safe and well. 

With the ongoing conflict in the Ukraine this is now touching all our lives more and more. 

I have said before putting aside the financial implications of this the humanitarian relief that is needed in these modern times is truly stunning. 

As I’m sure we all do, we want a swift and just end to the conflict and to see people being helped to rebuild their lives with whatever support can be provided. 

Looking toward the investment markets the opening 3 months of this year have been very tough for all sectors and assets. 

The perfect storm of rising inflation, interest rates and energy prices have hit at the same time of the Ukraine conflict. 

This has most certainly compounded the issues here overall, seeing as even greater pressure is then applied to the energy sector alone. 

This is going hand in hand with more covid lock downs in China and the far East with cases shooting up with deaths following. 

The overall world economy continues to struggle with how it should react toward covid at the same time having to understand what is happening in the Ukraine. 

To try and add some context here, let’s look back to the opening quarter of 2020 with the pandemic then in full force. This is set out below.

Then in the graph below, the first quarter of this year.

I have used the FTSE100, the S&P500 and the MSCI World Index to illustrate my point here seeing as these are a little more widely reported. 

Looking toward the last 3 months the selloff was almost as sharp as 2020 and we can see it has made a recovery since. 

The major difference this time around is that the FTSE100 has shown a very small positive return. 

This is expected seeing as this is mainly made up of basic materials, financials, and energy-based companies. These have been and will continue to be more sensitive to the marketplace moving forward. 

Also, in this last 3 months we can see as the Russians advanced there were some double-digit losses at that time but a recovery following on. 

Being invested and not acting was very much the correct move seeing as this recovery would have been missed.

This is not all doom and gloom and looking back to 2020 it shows that being long term investors does very much pay off. Looking to time the markets or jump to try and chase returns will create more issues and worse outcomes. 

Looking ahead the markets now better understand the issues with the Ukraine and the pressure on energy given this will go on a little longer hand in hand with more inflation. 

The markets are still struggling with how much and how far the US Fed will go in their rate increases and if their 0.25% increase at each point will continue. Some commentators expect a further 6 rises this year. 

The US rate is seen as a risk-free return so this moves market sentiment by some way, and all eyes are there right now. 

Finally, looking at the chart below we can see some examples of the best and worst returns going back to 2012.

What we can see here is that there is no superior asset class and being invested and diversified always is the key theme along with a blend and mix of approaches. 

This will continue to be our path forward as we have done and we will always plan for the longer term, not short-term events. 

I will provide a summary of the new tax year changes in due course and pick up any items that may well affect our planning. 

Please feel free to contact us at any time if you want to discuss your planning or want further information.