The week in review

Data published during the week of 27 June showed the scale of the economic changes and swings taking place, with fears of recessions globally continuing to impact investor sentiment.
Published 5 July
4½ mins

What’s happened in markets?

FTSE All Share-0.86-5.24-5.37-4.630.362.083.30
Euro Stoxx 50-2.40-8.20-9.90-17.54-12.552.413.23
S&P 500-2.18-6.60-15.51-19.12-10.1710.6811.51
Japan Topix-1.03-4.70-4.97-6.11-2.567.715.13
MSCI Asia Pac.-1.41-4.53-9.87-16.88-25.071.843.20
MSCI Emerg. Mkts.-1.57-6.53-12.40-18.21-25.320.312.35
Jo’burg All Shares-0.99-7.21-12.91-8.873.617.878.68
UK Gov’t Bonds1.50-0.07-5.99-12.58-12.06-3.04-0.41
US Gov’t Bonds1.30-0.01-2.99-8.66-8.38-0.640.84
Global Corp. Bonds0.70-1.93-5.98-12.44-12.32-0.901.43
Emerg. Mkt. Local-0.80-4.63-9.05-13.40-17.06-4.58-1.28
Figures in the respective local currencies as at the end of trading on 01/07/2022.

The week of 27 June saw a divergence of Consumer Price Index (CPI) readings between European markets. In Germany, the CPI declined to 8.2%, compared with a consensus estimate by analysts of 8.6%. Spain, however, saw annual consumer inflation rising to the 10.0% level for the first time since 1985, despite predictions of an 8.7% increase.

But inflation is just one of the clouds beginning to signal the outlook may not be as bright as desired. The Federal Reserve Bank of Dallas’ general business activity index for manufacturing in Texas declined to -17.7 in June of 2022, from -7.3 in May and its lowest level since May 2020. Meanwhile, on Friday 1 July, the latest report from the Institute for Supply Management (ISM) showed a gauge of factory employment contracting for a second straight month. And more bad news may follow on the economic front. 

Against this backdrop, therefore, news of Russia technically defaulting on its foreign-currency sovereign debt for the first time since 1918 will not have come as a surprise. And although the country’s failure to make a payment of approximately US$100 million to its bondholders is not due to a shortage of cash per se, but rather because of Western sanctions over its war in Ukraine all but ceasing access to its foreign currencies, the war and its impact on food and energy prices will probably lead to other economies struggling too.

But it was the recent COVID-19 outbreaks and lockdowns that prompted the People’s Bank of China to pledge to provide additional monetary support to its economy, with its a ‘zero-Covid’ policy not only hampering local growth, but also internationally given the major impact these lockdowns have on supply chains.

As a result of the above and other news, investors see significant movement in key financial markets. Over the short term, all asset classes have struggled with fears of recession, which are impacting investor sentiment further.

Although all the figures published were in negative territory, emerging markets (-6.7%) continued to outperform developed markets (-8.7%). In terms of style, growth (-8.3%) outperformed value (-8.5%), while large capitalisation stocks (-8.1%) outperformed small capitalisation stocks (-10.0%).

Healthcare (-2.9%) was the better story over the last 30 days, while materials (-15.0%) was the worst performing sector – a factor that can most likely be attributed to the fall in many commodities.

Within the debt market, the higher yield bond sector has been hit the hardest owing to the risk environment. And in currency news, the US dollar’s strength against other major currencies continues.




UK GDP (QoQ)0.8
UK PMI53.153.1
UK CPI (YoY)9.1
EU GDP (QoQ)0.6
EU PMI51.951.9
EU CPI (YoY)8.6
US GDP (QoQ)-1.6
US PMI55.954.0
US CPI (YoY)8.68.8

What’s happened in portfolios?

In terms of equities, we’re witnessing a fairly challenged environment with clear headwinds that are causing volatility, meaning that we feel that this is a good time to lock in the relative gains from our value position and tilt our equity positioning towards quality focused strategies. Quality positioning in strategies managed by Morgan Stanley and Fundsmith have held up well on a relative basis given the slowing outlook and recession fears. This is owing to their resilience, strong margins and recurrent revenues.

The significant upward shift in bond yields, meanwhile, has made fixed income more attractive. And as the current environment is less supportive for credit, we have reduced our overweight to short-term high yield, which has lagged, and, instead, are of the mindset that this is a good time to gradually increase duration.

Real assets appear attractive as an alternative to fixed income and with some inflation protection, and open-ended funds have pulled back performance over the month. Infrastructure is of particular interest given its relative valuations and stability.

Alternative strategies remain preferable in the current environment in order to provide a credible diversifier within portfolios.

Cash, meanwhile, holds little attraction.

What's happening this week?

7 July • UK Final Q1 Labour Productivity | 7 July • EU Final Purchasing Managers’ Indexes | 8 July • US Nonfarm Payrolls

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; British Retail Organisation; World Bank; FX Leaders; Trading Economics; VOA News and Center for Strategic and International Studies.

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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