Data source: Bloomberg

Russia’s invasion of Ukraine in late February caused a global shock. The grave human implications bled through the markets, with equities dropping and bond yields rising.

Oil and gas price sharp increases contributed to a further surge in inflation as well as supply chain disruption.

Intermittent fears of a global recession drove periodic sell-offs in some of the safer stocks too.

Elsewhere, Chinese equities were negatively affected by renewed Covid-19 outbreaks, leading to new lockdowns in some major cities.

 Sources: JP Morgan, Schröders, Bloomberg.

In the US

• US stocks declined in 1Q2022.
• Energy and utility companies were among the best performers, outperforming a falling market with modest gains.
• Technology, communication services and consumer discretionary were among the weakest sectors.

In the Rest of the World

• Share prices in China fell sharply lower in the quarter. The number of Covid-19 cases in Hong Kong and China spiked to their highest level in more than 2 years despite the Chinese government pursuing one of the world’s strictest virus elimination policies.
• The LATAM markets all generated strong gains, led by Brazil. Other EM net commodity exporters posted gains, including Kuwait, Qatar, the UAE, Saudi Arabia and South Africa.
• Russia was removed from the MSCI Emerging Markets Index on March 9, at a price of zero.

In the US

• The Russian invasion amplified existing concerns over inflation pressures, particularly through food and energy.

• Wages continue to rise, but have not yet matched the rate of headline inflation. The annual US inflation rate, as measured by the consumer price index, hit 7.9% in February.

• The Fed raised interest rates by 0.25%. Further hikes are expected through the rest of 2022.

In the Rest of the World

• In the last week of March, the Bank of Japan conducted fixed-rate bond purchase operations for several consecutive days. This unprecedented move was a clear statement of the Bank’s intention to keep bond yields within the current target range of +/- 25bps.

• The U.S. dollar and Swiss franc rose, given their “safe-haven” status, as did commodity currencies like the Australian and New Zealand dollar.
• The Russian ruble depreciated around 30% due to the impact of sanctions.
• The yen weakened sharply against all major currencies in March, reaching a six-year low against the US dollar. The scale and timing of the yen’s weakness is unusual given the currency’s perceived role as a safe-haven asset at times of uncertainties.
• Crypto-currencies were not immune to risk-off sentiment in this turmoil macro-environment. BTC and ETH exhibited significant price volatility – ETH always more volatile than BTC – and we saw an elevated correlation with traditional risky assets.

• Commodity prices soared given Russia is a key producer of several important commodities including oil, gas, and wheat.

• The S&P GSCI Index achieved a strong return for 1Q2022, pulled up by energy and wheat.

• Energy was the best performing component of the index, with strong price gains for gas, oil, natural gas and heating oil driven by rising global demand for energy and fears of supply shortage as a result of the Ukraine crisis.

• Within the agriculture component, wheat, Kansas wheat and corn all recorded sharp price gains on fears that supplies could be impacted by the conflict – Russia and Ukraine account for around 30% of global wheat exports.

• Within industrial metals, the price of nickel was sharply higher in the quarter. Aluminium and zinc prices were also significantly ahead in the period.

• With precious metals, gold and silver achieved small gains over the quarter. Rising concerns of a possible global recession drove investors out of safe-haven assets too.

JP Morgan Market Update

“The energy crisis induced by this war will move many governments to accelerate their energy transition plans, creating significant growth in the obvious beneficiaries from such a transition but also in some less obvious areas.“

Morgan Stanley Global Outlook

“Reduced liquidity in financial markets is exacerbating downward price pressures making it difficult to disentangle changes in fundamentals from temporary dislocations.“

April 24: French Presidential Election 

What we can expect: 

Presidential elections in France determine who will serve as the President of France and Co-Prince of Andorra for the French side for the next 5 years. 

The French people will have to choose between the current president, Emmanuel Macron and far-right Marine Le Pen.

Le Pen said she would hold a referendum on whether to reinstate capital punishment in France if elected. Le Pen has also campaigned for a ban on wearing Muslim headscarves in public.

May 3: Federal Reserve Meeting

What we can expect:

Some observers believe that the FOMC could raise the federal funds rate by 50 basis points in May, double the March increase, as it attempts to stamp out the highest rates of U.S. inflation in more than 40 years.

May 29: Colombia Presidential Election 

What we can expect:

While a majority of the 20-plus presidential candidates appeared on consultation ballots in March, a few are running independent of coalitions and won’t appear on a ballot until the May 29 first-round vote. A runoff will take place on June 19 if no candidate gets more than 50% of the first-round vote. Presidents in Colombia are limited to one, four-year term. 

One of the most well-known candidates of this election is Ingrid Betancourt.

In 2002 then-Senator Betancourt was campaigning for president when she was kidnapped by FARC guerrillas and held hostage for six years. After her rescue, she spent a decade in France, where she also has citizenship, before returning to Colombia into the political scene. During the 2018 campaign, she was an advocate for the implementation of the peace agreement with the FARC, while also criticizing the armed group’s leadership.

Betancourt, 60, is a late entry to the 2022 race, announcing only in mid-January. She is the most high-profile female candidate in the presidential field.