Cross Asset Review – January 2022

by | Mar 7, 2022 | Market Insights

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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