RI Advice Monthly Market Update – March 2022

Global shares fell 2.8% and 5.5% in unhedged and hedged terms, respectively, which was a similar result to what we saw in January. Global emerging markets fell 5.8% over the month.

Australian shares performed reasonably well during February, with the S&P/ASX 200 Accumulation Index gaining 2.1%. The leading sectors were Energy (up 5.81%) and Consumer Staples (up 5.57%). I.T. was again the worst performer (down 6.88%).

Fixed income returns for the month were again very poor, returning -1.2% domestically and -1.3% globally.

The Australian dollar (AUD) gained 2.8% against the US dollar, which basically offset last month’s loss. The AUD also gained 2.6% against the Yen and 2.2% against the Trade-Weighted Index.

Globally

U.S. Inflation is showing no signs of slowing, as the Federal Reserve gets ready to raise rates.

U.S. headline inflation hits another 40 year high in February at 7.9% year-on-year, the highest figure since January 1982. Core inflation is at 6.4%.

Euro area annual inflation was expected to be 5.8% in February this year, up from 5.1% in January, according to a flash estimate from Eurostat.

Locally

Consumer sentiment fell 4.2% month-on-month in March to 96.6 from 100.8 in the W-MI survey to be at its lowest level since September 2020.

The details suggest the fall was driven by concerns around

the Queensland and Northern NSW floods given the survey period (28 February to 4 March) and thus should rebound in time. Inflation concerns and the war in Ukraine are also likely to have been factors.

There appears to be a growing disconnect between the markets’ expectations of interest rate rises and recent RBA guidance. Some markets are pricing in around eight 25-basis point interest rate rises by mid-2023, while the RBA Chairman has indicated there are more dangers from lifting interest rates too early, than holding them steady for longer.

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