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
- 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.
- 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
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.
Source: Bloomberg & IOOF, 31 January 2022. All foreign exchange rates are rounded to two decimal places where appropriate. Please note: Past performance is not indicative of future performance.
For specific advice customised to your individual circumstances, contact Carrick Aland’s Wealth planning team on 1300 466 998 or visit carrickaland.com.au/wealth-planning/.
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