Market Update February 2022

Market slump in January

Global shares fell 2.2% and 5.1% in unhedged and hedged

terms, respectively. Global emerging markets rose 1.2% over

the month.

Australian shares performed poorly during January, with the

S&P/ASX 200 losing 6.4%. The leading sectors were Energy

(up 7.88%) and Utilities (up 2.56%). I.T. was again the worst

performing sector for the month (down 18.43%).

Fixed income returns for the month were very poor, returning

-1.0% domestically and -1.6% globally.

The Australian dollar (AUD) lost 2.70% against the US dollar

and 2.76% against the Yen. Note by mid-February, the AUD

is back up trading around 0.7185 USD.


Inflation and Tapering

Globally

• U.S inflation is still red hot. The consumer price index rose

0.6% for the month of January, 7.5% on a year-on-year basis,

and was the fastest rate since February 1982.

• Minutes of the January 25-26 Federal Open Market

Committee meeting stated, “that if inflation does not move

down as they expect, it would be appropriate for the

Committee to remove policy accommodation at a faster pace

than they currently anticipate”.

• China’s inflationary pressure continued to ease in January,

with the growth of both consumer and factory-gate prices

slowing further.


Locally

• Australia’s Consumer Price Index rose 1.3% in the December

quarter, bringing inflation for the full 2021 year to 3.5%.

• This is above the Reserve Bank of Australia’s medium-term

target range of 2-3% inflation. It will excite speculation about

the central bank lifting interest rates far sooner than expected.

• As expected, at the RBA’s February Board meeting, a

decision was made to end QE.

• The official cash rate remained at 0.10%, but the futures

market is pricing in 4 rate rises this year.


Major asset class performance

Asset classes1 month %1 year %5 years (p.a.) %
Australian Shares-6.49.48.5
Australian Small Companies -9.06.79.6
Global shares (hedged) -5.118.612.5
Global shares (unhedged) -2.227.315.1
Global small companies (unhedged) -4.713.5 11.6
Global emerging markets (unhedged) 1.21.0 9.9
Global listed property (hedged) -5.522.25.8
Cash0.00.01.1
Australian fixed income-1.0-3.53.0
International fixed income-1.6-2.62.9

Source: Source: Bloomberg & IOOF, 31 December 2021


Indices used: Australian Shares: S&P/ASX 200 Accumulation Index, Australian

small companies: S&P/ASX Small Ordinaries Accumulation Index, Global shares

(hedged): MSCI World ex Australia Net Total Return (in AUD), Global shares

(unhedged): MSCI World ex Australia Hedged AUD Net Total Return Index; Global

small companies (unhedged): MSCI World Small Cap Net Total Return USD Index

(in AUD); Global emerging markets (unhedged): MSCI Emerging Markets EM Net

Total Return AUD Index; Global listed property (hedged): FTSE EPRA/NAREIT

Developed Index Hedged in AUD Net Total Return; Cash: Bloomberg AusBond

Bank Bill Index; Australian fixed income: Bloomberg AusBond Composite 0+ Yr

Index; International fixed income: Bloomberg Barclays Global Aggregate Total

Return Index Value Hedged AUD


Please note: Past performance is not indicative of future performance



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Market Update February 2022