The investment markets

A series of uncertain and unpleasant inflation and interest rate policies in January of 2022 was followed by the tragic invasion of Ukraine by Russia in February that caused unrest across global markets. Bond yields and equities declined, while commodity prices rose sharply. Sanctions imposed on Russia meant that the commodity prices soared due to Russia being a major supplier of oil, wheat and gas. The sanctions imposed on Russia resulted in a spike in commodity prices due to Russia's role as a major oil, wheat, and gas supplier. This created further uncertainty around inflation.

In the US, inflationary pressures continue to rise despite The Federal Reserve (Fed) raising interest rates by 0.25%. In response to Russia’s attacks on the Ukraine, President Biden banned Russian oil imports. US companies, especially energy and utility companies, performed well, however the US equity markets presented a weak first quarter.

The sanctions imposed on Russia affected the Eurozone as they have close ties with Russia and Ukraine. This resulted in the sharp decline of Eurozone shares. Due to rising inflation, the ECB plans to terminate bond purchases in September. Until the EU creates an alternative to gas and find faster sources of renewable energy, energy prices continue to be of high concern.

Meanwhile, in the UK, investors hiked prices to accommodate inflationary shock. In the wake of Russia's invasion of Ukraine, the oil, mining, and banking sectors have increased. Subsequent to this the bank of England has increase its official rates by 50 bps, while the UK CPI will peak close to 9% this year.

Now moving to the southern part of the world looking at South Africa. With the country still recovering from Covid-19, the invasion of Ukraine by Russia could not have made things any better. Meanwhile the local equity markets had a diverse start to the year with the FTSE/JSE All-share Index obtaining 0.9%, while the FTSE/JASE Capped Swix 40 obtained 3.4%. It was a stellar start for the resources sector, which gained 3.9% in the first quarter, but now it has taken a drastic turn as commodity prices (such as oil and petrol) have increased swiftly. Despite securing funding from the World Bank which will assist with the government's Covid-19 response to recover the economy of the country, the South African markets have difficulties adjusting to the increase in inflation and interest rates.

Domestic (rand-denominated) fund returns