Although global share markets finished the quarter 7.9% higher on average, it wasn’t all smooth sailing, with markets declining in November on concerns the spread of the Omicron COVID variant would put company earnings at risk. In addition, news of more persistent and higher inflation became an increasing focus of investors. Whilst a 6.8% annual inflation result in the United States, accompanied by higher inflation readings in Europe and United Kingdom, did not spook equity markets, it triggered a change in the pattern of price growth. Valuations of higher “growth” companies, typically in the technology sector, with lower current earnings (and the promise of growing earnings in future years) are more vulnerable in an environment of rising inflation and generally underperformed last quarter. We are not overly exposed to this sector of the share market.
Since the end of December, inflation concerns and the prospect of interest rates rising faster than anticipated have triggered a broader correction in equity markets. This is not unexpected due to the tail effects of the COVID disruptions and the need for central banks to wind back loose monetary policy. Our portfolios are well diversified and with a more neutral interest rate setting still likely to be near historical lows, the case for investing in shares and property should continue to be attractive over the long term.
I encourage you to review your portfolio report for the quarter and look forward to speaking with you soon.
The information provided should not be considered personal financial advice as it is intended to provide general advice only. The content has been prepared without taking into account your personal objectives, financial situations or needs. You should seek personal financial advice before making any financial or investment decisions.