Monthly Market Review – February 2022
VIEW PDFHow the different asset classes have fared: (As at 28 February 2022)
International Equities
Unhedged and hedged international equities exposures again finished down in the month of February. Unhedged fell 5.46% hedged fell 2.72%. Markets were already trending downwards due to the impacts of rising rates and inflation when Russia’s invasion of Ukraine in the last few days of February spooked markets further to the downside as the costs and repercussions of war were priced in. The United States makes up a significant proportion of this this index and has been impacted severely by the current economic environment due to the high weightings of Technology stocks in their indexes. Technology stocks have fallen he most out of any sector across the last months.
Australian Equities
The S&P/ASX All Ordinaries Index actually rose 1.73% on the month. This was in stark contrast to the international equity’s indices. Australia finished positive due to index weightings to energy, materials, consumer staples and financials. As previously stated, Australia has higher weightings than other international indexes in the materials, energy and financial sectors which has helped soften the impact of rising rates and inflation. The War in Russia and Ukraine sent materials and energy much higher due to the supply constraints getting priced in benefitting some of Australia’s largest companies.
Domestic and International Fixed Income
Both Australian and International Fixed Income fell 1.21% and 1.3% respectively on the month. The longend 10-year yield curves rose across the world throughout February. This was the main contributor to the losses on the month. Generally, falling equity markets will cause bond prices to rise for protection against equity risk. This hasn’t occurred yet as Central Banks are looking to start raising rates in March. This puts upward pressure on yields and downwards pressure on bond prices. Central Banks seem to be more concerned with stopping inflation than coming to the rescue of equity markets, hence why equity markets and bond markets are both falling at the same time.
Australian Dollar
The Australian Dollar (AUD) rose in February as money flowed into the domestic market. This occurred due to the high index weightings in sectors that tend to benefit from the current environment of higher commodity prices and higher rates. There was significant volatility during the days of the Russian invasion of Ukraine, however it ended spiking upwards in the final day of the month. Whilst the Australian market is not insulated from what is happening globally during this month it was seen as a safe haven of sorts.
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