2Q 2022 Market and Economic Overview

Inflation took centre stage in the second quarter of 2022 and markets across all asset classes retraced substantially. The report cited the persistence of Covid, the war in Eastern Europe, decades-high inflation, shifts in monetary policy in the US and Europe and fears of an economic slowdown as having taken equity markets into a bear market, defined as a fall of 20% or more from recent highs. The MSCI World Equity Index fell 15.81% over the quarter and 20.63% over the half year. US equities fell 15.56% in the quarter, German equities 13.43%, euro area equities 11.09%, Swiss equities 10.25%, Japanese equities 5.99% and UK equities 3.39%, while Chinese equities rose 6.43%.

In June the US Federal Reserve raised its target range by 75 basis points to 1.5%-1.75%, still well below an inflation rate of over 8%. The European Central Bank was expected to raise rates at its July meeting for the first time in 11 years. US long-term yields rose above 3%, from as low as 0.3% a year earlier. The report cited the Zero Covid policy in China and the war in Ukraine as sources of disruption to manufacturing capacity and to supplies of industrial and agricultural commodities. Inflation was 8.60% in the US, 8.60% in the euro area, 7.60% in Germany, 9.10% in the UK and 2.90% in Switzerland.

The report discussed structural influences on inflation, including deglobalisation and shifting supply chains, clean energy initiatives and the move away from higher-density energy sources, prolonged underinvestment in basic materials, metals and energy, continuing population growth, and the war between Ukraine and Russia and the resulting food and energy crises. It noted that most of these were supply-side rather than demand-side influences.

In currencies, the euro fell 5.55% against the US dollar over the quarter to 1.05 and sterling fell 7.48% to 1.22, while the dollar rose 11.32% against the yen to 135.43 and 4.17% against the Swiss franc to 0.96. Gold fell 6.68% to USD 1,807.73. The report also discussed the outlook for economic growth, recession risk, interest rates and inflation.

Important information: This snapshot summarises MWC Group's market commentary for the period shown and is provided for general information only. It is not investment, tax or legal advice, a personal recommendation, or an offer or solicitation to buy or sell any investment, and it does not take account of your personal circumstances. Views and figures reflect conditions at the date of publication and may since have changed. Past performance is not a reliable indicator of future results. The value of investments and any income from them can fall as well as rise, and you may get back less than you invested. Exchange-rate movements can affect returns. Market data comes from third-party sources believed to be reliable, but its accuracy cannot be guaranteed. Please seek personal advice before making any investment decision. Issued by Manentia Wealth Consulting Group Limited (C80087), licensed by the Malta Financial Services Authority.