13th May 2022

Market Update – April 2022

The risk of weaker economic activity, lower corporate earnings growth and more restrictive monetary policy is an unhealthy combination, and one should not be blamed for harbouring a cautious outlook on markets in the short term. However, although global bond and equity markets have both sustained capital losses during the first three months of 2022, we have started to see glimmers of improvement towards the end of the first quarter.

Cash had been a strong asset class for investment during this period, although with inflation rates now hitting highs that have not been seen for several decades, the current challenge is that of preserving the real value of accumulated wealth over the longer term.

With bond yields continuing to rise, equities have rallied from the lows that they reached in reaction to Russia’s invasion of Ukraine and the associated disruption to commodity supplies.  The markets now appear to have priced in the ongoing situation in Ukraine, but any widening or escalation in the conflict could lead to further increased volatility.  Despite this, equities may remain the most attractive asset class for generating long-term returns.

First quarter results posted by companies shall shortly highlight the effects of the rising levels of inflation on corporate earnings.  Coupled with ongoing consumer price inflation rises, especially in the UK when the household energy price cap is lifted again in April, the response of central banks will be crucial in determining the next phase of this investment cycle.

The Bank of England recently announced its third base rate rise in March, and the Federal Reserve initiated its own policy tightening with a rise of 0.25%. Markets will also have to contend with the end of Quantitative Easing and, potentially, the beginning of Quantitative Tightening.

Concerns that central banks might lose control of inflation have grown, with the forecast for 2023 having also risen this year, from 2.9% to 3.3%.   More reassuringly however, the 2024 forecast is still at 3%, very much in line with the levels that prevailed pre-Covid.

We need to remind ourselves that many people are focused on investing for the longer term.  It is not clear whether the current slowdown in economic activity will tip the world into a recession, but trying to time the markets in the short term tends to impact on longer-term performance and should therefore be avoided.

The primary benefit of the Integrity365 Centralised Investment Proposition is the access we can provide to world class fund managers and fund management companies. This incredibly diverse investment approach allows our clients to benefit from the collective knowledge and resources of managers who are responsible for billions of pounds worth of investments.

For any additional support with your investments in these turbulent times, or to discuss any details within this update further, please do not hesitate to get in touch with an Integrity365 adviser on 0117 450 1300.