Market Observations: Q1 2022

The first quarter of 2022 was full of unpleasant surprises, starting with high levels of financial market volatility as January uncertainty over global inflation and interest rate policies, and risk-off investor sentiment, were reflected in broad weakness across both global equities and bonds. Then the tragic and destructive Russian invasion of Ukraine in the last week of February, and the unprecedented level of sanctions imposed against Russia, created even further uncertainty, along with rocketing commodity prices and inflation concerns. This combination of developments meant that many global asset returns, even from usual safe-havens like US Treasuries, were squarely in the red.

Commodity-producer South Africa was among the few beneficiaries of the spikes in precious metals and other commodity prices. In contrast to most other countries, both local equity and nominal bond markets registered respectable returns for the quarter, and the rand appreciated substantially against the major global currencies. However, this was offset to some extent in March by widespread bearish investor sentiment and weakness in Naspers/Prosus shares resulting from a further sell-off in Tencent amid a renewed Chinese government regulatory crackdown. 

May 16 2022 By David Knee - M & G Investments