Investment update for April 2022
Global equity markets experienced a significant decline during the month of April on the back of the ongoing war in Ukraine, expectations of further increases in interest rates due to high inflation and lockdowns in China. Inflation in the US is at particularly high levels, prompting the US Federal Reserve Board to signal its intention to increase rates more quickly to bring the level of inflation down.
While the US GDP fell over the first quarter of the year, this was driven by an increase in imports, as consumer and business demand remains strong. Other US economic data is mixed with mild consumer confidence, falling home sales but strong home price gains and increase in durable goods orders. US equities, particularly the Technology sector experienced a significant decline during the month of April.
The war in Ukraine has started to impact European economic data, particularly given Europe’s significant energy dependency on Russia. The European equity market produced another month of negative performance. Conversely, the UK equity market posted a small positive performance in April, given the strong returns of its large cap stocks, several which are operating within the Energy and Consumer Staples sectors. In April, Emmanuel Macron was re-elected for a second five-year term as the President of France, defeating Marine Le Pen in the second round in a repeat of the 2017 French presidential elections.
The Australian equity market exhibited a small negative performance over the month of April, with the Resources sector being the key detractor to overall performance. Conversely, the Utilities, Industrials, Healthcare and Consumer Staples sectors produced positive returns. The latest inflation figure released during the month was higher than expected, leading to expectations that the RBA would increase interest rates at its meeting in early May, as it did. Rising bond yields caused by the increase in market expectations of further interest rate rises led to the continued negative performance of major bond indices. Furthermore, credit spreads also widened over the course of the month.
The Australian dollar underperformed against the US dollar, but this was due to US dollar strength. The Australian dollar continued to outperform other major currencies over the month, particularly the Japanese Yen, which has materially devalued over the financial year to date. Australian listed real assets outperformed international listed real assets over the month, with Australian listed infrastructure in particular exhibiting strong performance.