Australian shares outperform
- In March the terrible events in Ukraine continued to take a tragic human toll while also escalating insecurities about the rise in food and energy prices around the world. China’s lockdowns to attempt to control the Omicron spread also continued to slow economic growth and added to price pressures.
- Data at the end of the month showed U.S. inflation at 40-year highs and a robust labour market, leading investors to lift expectations that the US Federal Reserve (the Fed) would deliver on projected rate rises and balance sheet reductions this year.
- International shares finished the month 2.9% (hedged) and -5.6% (unhedged) with the AUD rising strongly.
- Australian shares again outperformed gaining 6.9%, reflecting the high commodity exposure of the market.
- Emerging markets fell once again in the month on the back of rising energy prices and China lockdowns, falling -5.6%.
Bond market woes
- Bond market turmoil continued in the month as the expectation that rate hikes would happen more quickly rose. Fed Chair Powell’s dialled up the combative narrative stating he would take “necessary steps” to control inflation and hike rates by 0.5% in May if appropriate and to begin to reduce Fed bond holdings.
- Financial media headlines were dominated by the inversion of the U.S. yield curve, historically viewed as an indicator of a US economic recession some 12 to 18 months down the track.
Oil price volatility
- Expectations that the Fed would raise interest rates more quickly than expected saw the USD rally.
- Oil prices continued to be volatile. Prices spiked early in the month before falling back following US President Biden’s announcement to release emergency US oil supplies from the nation’s strategic petroleum reserve.
- Unsurprisingly Australia’s pre-election budget included a cash splash. $250 cash payments to pensioners and welfare recipients and halving of the fuel excise are expected to support retail sales in the short-term.
- The Reserve Bank of Australia (RBA) held on to its current policy settings at its 1 March meeting, although policy is expected to be tightened over the next few months.
Major asset class performance (%)
Asset classes | 1 month | 12 months | 5 years (p.a.) |
Australian shares | 6.9 | 15.2 | 9.4 |
International shares (hedged) | 2.9 | 10.9 | 11.6 |
International shares (unhedged) | -0.9 | 11.6 | 12.9 |
International emerging markets (unhedged) | -5.6 | -10.1 | 6.3 |
International small companies (unhedged) | -2.8 | -0.2 | 10.0 |
Global listed property | 5.0 | 17.7 | 6.2 |
Cash | 0.0 | 0.0 | 1.0 |
Australian fixed interest | -3.7 | -5.5 | 1.9 |
International fixed interest | -2.1 | -4.0 | 2.0 |
Source: JP Morgan and IOOF, 31 March 2022.
Indices: Australian shares: S&P/ASX 300 Accumulation | International shares (hedged/unhedged): MSCI World ex Australia Net | International emerging markets: MSCI Emerging Markets Net in AUD (unhedged) | International small companies (unhedged): MSCI World ex Aust Small Cap | Global listed property: FTSE EPRA/NAREIT Developed Rental Index ex Australia (hedged) | Cash: Bloomberg Bank Bill | Australian fixed interest: Bloomberg AusBond Composite 0+ Yr Index | International fixed interest: Barclays Global Aggregate Bond Index (hedged).
Please note: Past performance is not indicative of future performance.
Currency
Exchange rates | At 31/3/22 | % change in 1 month | % change in 12 months |
AUD/USD | 0.75 | 3.02 | -1.53 |
AUD/Euro | 0.68 | 4.46 | 4.40 |
AUD/Yen | 91.08 | 9.07 | 8.30 |
Trade weighted index | 63.60 | 4.95 | -0.47 |
Source: Bloomberg and IOOF, 31 March 2022. All foreign exchange rates are rounded to two decimal places where appropriate.
Please note: Past performance is not indicative of future performance.
Source: https://investmentcentral.ioof.com.au/news-and-insights/news-and-insights-article/Market-Watch-March-2022
