Two volatile months into 2022 and already investment themes are indicating that markets will have some new factors to focus on over the coming months, very different to what we have seen for roughly two years. Covid is now in the rear-view mirror, significant geopolitical tensions are back in the forefront of investors’ minds, and monetary policy is in for a major and long-overdue shift. In spite of these changes, we believe equities are likely to rebound from their recent pullback and work their way higher over the course of this year. Throughout this latest Investment Update we will look to explain our house views and the reasoning for our cautiously optimistic thinking as we move through Q1 2022.
The ongoing situation in Ukraine, which we will explore further, has led some market commentators to speculate about the possibility for a less hawkish Federal Reserve when they meet later this month. Fed officials, who are still eager to begin the rate hiking cycle and react to multi-decade high inflation, say that they are monitoring any spillover effects of the conflict onto US economic activity. While we are of the opinion that the Fed will press on with their plans to begin increasing interest rates this month, this may be subject to any escalation in Ukraine. Rising energy prices would likely add further pressure to already-high inflation around the globe. These inflationary moves may leave little room for central banks to move into dovish territory despite the geopolitical turmoil.
While it is impossible to accurately forecast how long the fighting will last and when the volatility will subside, we are of the strong opinion that following this initial market shock, the situation will ultimately stabilise.
Read the full report below or download here.SFS Monthly Update ( Feb 2022)
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