Market Pulse - April 2022

Key themes

The market sell-off, which commenced in the first quarter, intensified through April; global equities and bonds are both down mid-single digits since the end of March.

Expectations of aggressive central bank policy to fight inflation, global growth concerns and the ongoing war in Ukraine all weighed on investor sentiment in the markets.

Inflation readings hit consecutive new highs, interest rate expectations rose and bond yields rocketed. Bondholders have been bitten at both ends so far this year with capital losses added to the negative real yields on their holdings.

Markets snapshot

The MSCI AC World equity index fell -6.5% (-2.9% in euros).

The US fell -9.1% (-4.1% in euros) as growth stocks were hit hard on the back of rising Treasury yields, growth fears and some disappointing earnings reports.

UK equities posted positive returns, rising 1.0% (1.6% in euros), benefitting from their relatively large weight in materials and commodity stocks.

Emerging markets fell -3.5% (-0.4% in euros), as markets priced in continued uncertainty from the Russia-Ukraine war, an increasingly inflation-focused Fed, intensifying lockdowns in China, and further dollar strength.

The Eurozone >5-year bond index returned -5.4% in April as bond markets continued their sell-off from the first quarter, leaving their year-to-date returns deeply negative at -12.2%.

The euro fell -4.7% against the dollar to 1.0545 as growth headwinds in Europe and prospects of a rapid pace of Fed rate hikes fuelled dollar strength versus the euro.

Commodities rose +5.1% (+10.9% in euros), bringing their year-to-date return to 39.9% (50.9% in euros) as the war in Ukraine dealt a major shock to commodity markets, altering global patterns of trade, production, and consumption. Crude oil was up +4.4% while European gas fell -22.1% in April.

Gold fell -2.4% as real yields moved higher on bets of rising rates by global central banks.

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