Background
The markets and the JIC Portfolios got off to a poor start to 2022. The Federal Reserve became notably more hawkish in its response to rising inflation. US inflation hit 7 per cent in December and followed up with a consensus beating 7.5 per cent in January. Expectations are for at least four interest rate increases in 2020, the first in March. The question remains whether the Federal Reserve will kick things off with a quarter-point rise or a half. It is also on track to end its Quantitative Easing programme in March. Equity markets took fright, and at one stage, the NASDAQ 100 was down 16.6 per cent since 1 January and the S&P 500 down 11.9 per cent. Markets staged a decent recovery in the last week of the month but have since succumbed to further weakness in February. The S&P 500 ended January down 5.3 per cent, and the NASDAQ Composite, 9 per cent. The S&P's fall was its eighth worst start to a year since 1928.
The FTSE 100 stood out as one of the only major equity indices to post a positive return in January. It gained 1.1 per cent. The FTSE 100 is seen as a "value" play due to its high financial and resource stocks exposure. The FTSE All-Share, however, fell 0.3 per cent. It was held back by the performance of mid- and small-cap stocks. FTSE Aim All-Share was off 10 per cent, FTSE 250 -6.6 per cent and FTSE Small Cap, -4.1 per cent. Continental European markets fared relatively well with the Dax off 2.6 per cent, the Italian MIB -2.4 per cent and the CAC -2.2 per cent – no real sign yet of the European Central Bank (ECB) slowing down the printing press.