The week in review

The week of 2 May saw continued volatility in markets. Global stocks and bonds retreated as US and UK central banks raised their base rates again in an attempt to curb inflation pressures.
Published 10 May
7¾ mins

What’s happened in markets?

FTSE All Share-2.42-2.87-1.75-1.684.683.784.06
Euro Stoxx 50-3.73-3.77-9.67-14.00-6.364.733.10
S&P 500-0.18-7.90-8.05-13.08-0.4913.9113.44
Japan Topix0.86-0.360.33-2.781.658.206.71
MSCI Asia Pac.-4.29-9.38-15.20-16.49-23.391.964.48
MSCI Emerg. Mkts.-4.13-9.53-15.03-15.75-21.091.653.76
Jo’burg All Shares-6.06-8.40-7.73-5.815.539.018.64
UK Gov’t Bonds-1.23-3.31-6.74-10.91-9.75-1.18-0.18
US Gov’t Bonds-1.19-2.92-7.01-9.59-8.750.000.80
Global Corp. Bonds-1.21-4.34-8.26-11.77-10.560.421.81
Emerg. Mkt. Local-1.49-6.32-11.58-11.43-15.02-2.04-0.38
Figures in the respective local currencies as at the end of trading on 06/05/2022.

The week of 2 May saw mixed economic data coming through. The US ISM purchasing managers’ index (PMI) for April indicated a small expansion in the manufacturing sector at 55.4, but this was down from the March reading of 57.1 and well below the 57.6 expected. Many respondents cited ongoing supply chain disruptions, stemming from the protracted lockdowns in China. There was more positive news in terms of US labour figures with 428,000 jobs added in April, according to the nonfarm payroll data announced on Friday 6 May, and the unemployment rate remained low and steady at 3.6%.

Meanwhile, the US Federal Open Market Committee (FOMC) acted in line with expectations and raised its benchmark rate sharply by 50 basis points for the first time since 2000. Federal Reserve chair Jay Powell indicated that a more aggressive 75-basis-point rise was not something the committee was currently considering, which led to a small rally in US stocks and government bonds following the announcement on Wednesday 4 May.

In the UK, the Bank of England raised its base rate, as expected, by 25 basis points to 1%, its highest level since February 2009, when rates were cut dramatically following the global financial crisis. The view is that inflation could potentially rise to 10% towards the end of the year and there is a danger of it tipping the economy into recession. This is especially concerning given the energy price rises due in October which could put further pressure on consumers.

In Europe, oil prices received a further boost after the European Union (EU) announced an embargo on almost all imports of Russian crude oil in six months’ time, in response to the continuing conflict in Ukraine. The EU will be faced with the challenge of sourcing alternatives as it imports around 3.5 million barrels of Russian oil and oil products every day and is also dependent on Russia for its gas supplies.

Elsewhere, China’s services sector activity contracted to its lowest level since February 2020, at the outset of the pandemic, with a PMI reading of 36.2, reflecting its controversial zero-Covid policy and mass lockdowns across many cities. This has impacted not only domestic demand, but also global supply.

On the corporate side, Shell reported a record first quarter profit of US$9.13 billion, its highest since 2008 and nearly triple the US$3.2 billion it announced for the same period last year, boosted by soaring commodity prices. BP reported an underlying replacement cost profit, used as a proxy for net profit, of US$6.2 billion for the first quarter of 2022, up from US$2.6 billion for the first three months of 2021. However, it also stated a headline loss for the period of US$20.4 billion, which included a US$1.5 billion hit as a result of withdrawing from Russia.

In other news, a single sell order trade by Citigroup Inc caused a brief crash in Nordic markets and a sudden fall in European shares on Monday 2 May.

Global equity markets continue to be highly volatile and the week of 2 May was no exception, with longer duration growth stocks (-12.0%) significantly underperforming the more cyclical value stocks (-4.8%) as interest rates go up. April was the worst month for the S&P 500 since March 2020 and since 2008 for the technology-heavy Nasdaq. Also in terms of style, both small capitalisation stocks (-7.9%) and large capitalisation stocks (-8.3%) were down. There was not much to separate developed markets (-8.1%) and emerging markets (-9.5%) over the short term, but over the longer term developed markets were more in favour. With the exception of energy (+5.0%), all sectors were in negative territory. On a relative basis, the defensive consumer staples (-3.3%) was the next best performing sector, while higher valued communication services (-12.9%), the cyclically-exposed consumer discretionary (-12.6%), and information technology (-10.2%) were the worst performers.

Within fixed income markets, April was also the worst month on record for global bonds (since the Bloomberg Global Aggregate index began in 1990). The correlation between equities and bonds at the moment means there is no real place to hide in terms of major markets.

The US dollar was among the top performing currencies for April as markets shunned risk, with the US Dollar Index reaching its highest level since December 2002, before falling back slightly.




UK GDP (QoQ)1.31.0
UK PMI58.2
UK CPI (YoY)7.0
EU GDP (QoQ)0.2
EU PMI55.8
EU CPI (YoY)7.5
US GDP (QoQ)6.9
US PMI58.3
US CPI (YoY)8.58.1

What’s happened in portfolios?

The market is currently favourable for equities, although we expect the volatility to continue. Every one of our equity managers, both in active global funds and the regional passive space, outperformed the MSCI All Country World Index (ACWI) in April. Although in absolute terms they are negative, given the risk-off environment. But our more defensive funds were able to outperform more strongly given their bias to consumer staples.

For fixed income assets, it has been a tough time given the rising yields and widening spreads. However, our short duration positions in all areas (including high yield, investment grade and government bonds) outperformed. In contrast, PIMCO Global IG Credit lagged, largely due to its longer duration and, consequently, higher sensitivity to interest rates. It also suffered as a result of its bias to more cyclical areas, such as high yield and emerging market debt, where spreads widened more.

Real assets remain an attractive alternative to fixed income to provide diversification and some inflation protection. Our renewables have put in an impressive performance, particularly Greencoat UK Wind up 15% this year and also releasing an impressive Q1 net asset value (NAV) that was up 12% – representing the largest NAV increase that any of the renewables funds have seen in any quarter since the sector was launched. The higher energy prices and inflationary pressure in the UK have provided tailwinds for this area, and it is also an attractive investment given its dividend growth is linked to the UK retail price index, meaning its shares will continue to benefit from higher power prices going forward.

In our alternative strategies, Princess Private Equity released its NAV for March and was up 1.7%.

What's happening this week?

11 May • US Consumer Price Index | 12 May • UK Gross Domestic Product | 13 May • EU Industrial Production

Clients of Nedbank Private Wealth can get in touch with their private banker directly to understand how their portfolios are responding to market events, or call +44 (0)1624 645000 to speak to our client services team.


If you would like to find out more about how we manage clients’ investments, please contact us on the same number as above. Or you can get in touch using the links to the forms towards the end of this page.

Sources: Nedbank Private Wealth; Bloomberg; Reuters; Financial Times; Institute for Supply Management; and US Bureau of Labor Statistics.

The value of investments can fall, as well as rise, and you might not get back the original amount invested. Exchange rate changes affect the value of investments. Past performance is not necessarily a guide to future returns. Any individual investment or security mentioned may be included in clients’ portfolios and is referenced for illustrative purposes only, not as a recommendation, not least as it may not be suitable. You should always seek professional advice before making any investment decisions.

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