Key Insights
In our latest Cross-asset review, we note the spikes in local and US VIX (share price volatility indices) as well as the Gold price, reflecting rising risk aversion.
The rise in inflationary expectations saw increases in real asset prices in January 2022 – Commodities and Real estate (global) rose over the month in AUD terms.
On the other hand, equity markets diverged from real assets; delivering negative results. The Australian all cap index (ASX200) was down 6.4% for the month while the small caps and micro-caps segments delivered more than 7% drawdown in January 2022.
The Australian REITs also retreated; reflecting rising domestic rate expectations.
Australian bonds delivered negative 1% return for the month to be down 3.5% for the year. Similarly,
global bonds realised 1% return for the month to be down 3% for the year.
AUD fell 2.9% in TWI terms reflecting heightened risk aversion globally.
Global equities delivered modest -2.2% return in AUD reflecting currency effect.
Overall, it was a tough month for a 70/30 type diversified funds as both equities and bonds delivered negative returns.
We expect volatility to remain high on the back of rising inflation and rate rise concerns in additions to concerns around geopolitical issues. |
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