Market Insights: Weekly Update (4 April 2022 – 8 April 2022)

In this week’s market updates, there is unease on investors' minds as the Fed tightens their monetary policy and the COVID crisis continues in China.
12 April 2022

In this week’s market updates, there is unease on investors’ minds as the Fed tightens their monetary policy and the Covid crisis continues in China.

Global equities gave back some of the gains recorded in March, as stocks pulled back after a strong start to the week. S&P 500 and MSCI World declined by 2.06% and 1.77% respectively, while MoneyOwl 100% equity portfolio was down 1.13%. The US 10-year Treasury rose 35 bps to 2.76%, putting pressure on global fixed income assets as the Bloomberg Barclays Global Aggregate bond index declined 1.26% last week.

The week was relatively quiet in headline news as uneasiness continue to drive the markets. Several issues remain on investors’ mind such as potential implications of the Federal Reserve tightening their monetary policy aggressively, Covid crisis returning in China and fresh sanctions on Russia.

Fed’s Assets Rapid Reduction

Federal Reserve Governor Lael Brainard called the task of reducing inflation pressures “paramount” and said the central bank will raise interest rates steadily while starting balance sheet reduction as soon as next month. During the middle of the week, details of the balance sheet reduction were released, and Fed officials laid out a plan to shrink balance sheet by more than $1 trillion a year while also raising interest rates to counter inflation.

Covid in China

China’s Covid crisis deepened as lockdown in Shanghai intensified amid a surge in new cases and reports of a new strain of the Omicron variant emerging. China, after quashing its initial outbreak in Wuhan in 2020, is currently experiencing its biggest jump in daily infections since 2020. China’s lockdown restrictions in several Chinese cities to contain the Covid crisis have primarily hit travel over both short and long-distances, which is a direct complication for global supply chains as productions stop and consumer consumptions are deferred. China authorities have signalled it would further loosen monetary policy at an “appropriate time” and explore new measures to boost consumption to battle an escalating Covid outbreak and spiking commodity prices.

Fresh Sanctions on Russia

Russia faced a fresh round of sanctions that includes banning of coal imports from Russia by the European Union (EU), while the US also ended imports of oil and gas. The sanction came after the discovery of civilian murders and other atrocities committed in Ukrainian towns that sparked global outrage. Sanctions currently under discussion include a US ban on investment in the country and increased penalties on financial institutions. Putin’s daughters, political figures and tycoons could also be targeted. Meanwhile, Asia’s tourists hotspots are missing their big-spending Russian guests.

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Disclaimer: While every reasonable care is taken to ensure the accuracy of information provided, no responsibility can be accepted for any loss or inconvenience caused by any error or omission. The information and opinions expressed herein are made in good faith and are based on sources believed to be reliable but no representation or warranty, express or implied, is made as to their accuracy, completeness or correctness. Expressions of opinions or estimates should neither be relied upon nor used in any way as an indication of the future performance of any financial products, as prices of assets and currencies may go down as well as up and past performance should not be taken as an indication of future performance. The author and publisher shall have no liability for any loss or expense whatsoever relating to investment decisions made by the reader.

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