Global Asset Allocation Team Market Update – March 2022 – Fiera Capital Corporation

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General | March 4, 2022

Financial markets swung sharply in February as pissed off investors eyed an escalating conflict between Russia and Ukraine, which heightened market jitters over soaring inflation, an impending monetary tightening cycle and concerns about slowing economic growth. Geopolitical tensions escalated at the end of the month as Russia’s attack on Ukraine caused investors to flee risky assets and raised concerns about the economic hit from the resulting sanctions, which added to an already tumultuous financial market backdrop.

Executive Chairman of the Board

Photo Market Update by Candice Bangsund

Vice President and Portfolio Manager, Global Asset Allocation

Global stock markets were turned upside down in February and the MSCI All Country World fell -2.7%. Unsurprisingly, emerging market equities underperformed their developed market counterparts, with notable weakness coming from emerging Europe. Meanwhile, speculation that the conflict will amplify inflationary momentum and fuel an aggressive pace of monetary policy tightening by the Federal Reserve pushed the S&P 500 into corrective territory, while developed international stocks also faltered. fall. In contrast, the S&P/TSX held up well and outperformed its global peers, thanks to robust returns from resource-heavy sectors (energy, materials).

Fixed income markets also generated negative results in February. Yield curves flattened in a bearish fashion, with short-term yields rising more than their long-term counterparts on bets that aggressive policy normalization in response to a four-decade peak in US inflation will slow the recovery. The two-year Treasury yield rose 25 basis points to 1.43%, while the ten-year yield rose a more modest 5 basis points to 1.83%. Similar moves were seen in Canada, with the two-year government bond yield rising 16 basis points to 1.44%, while the ten-year yield rose 4 basis points to 1.81% . Meanwhile, credit spreads widened significantly as risk aversion took hold, and government bonds outperformed their corporate counterparts. For the month, the Barclays US Aggregate Bond Index fell -1.1%, while the Canadian FTSE bond universe lost -0.7%.

The US dollar rose as deteriorating risk appetite prompted investors to flock to the safe-haven currency. The Canadian dollar managed to strengthen against a wild greenback, with soaring oil prices supporting the loonie. In contrast, the euro and the pound weakened as investors reduced their bets on rate hikes from the European Central Bank and the Bank of England.

Finally, commodity prices have risen the most since 2009 as traders consider the difficult geopolitical landscape and a range of supply risks triggered by the Russian invasion of Ukraine, which threatens key energy supplies, crops and metals. Crude oil soared on fears of reduced supplies from the world’s second-largest crude exporter, which comes at a time when the global oil market was already extremely tight. Agricultural markets also performed well, with wheat and soybean prices rising double digits. Meanwhile, gold capped its biggest monthly gain since last May as a series of sanctions against Russia raised concerns about the impact on global growth and boosted demand for the safe-haven metal.

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