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07 Feb 2022

Markets in a nutshell - January 2022

January was a stark reminder to investors that risks abound. Developed market equities fell sharply and volatility spiked as investors reacted to hawkish signs from the US Federal Reserve portending an unexpectedly fast rise in interest rates to reign in surging inflation. US bourses led the declines given lofty valuations, with the long duration FANG Index falling most. Emerging markets outperformed owing to more moderate declines from Chinese equities and Brazilian shares posted double-digit gains in part on surging iron ore prices.

All sectors were lower, aside from energy as oil trended higher, and financials on the move higher in yields. Sectors that fell most were information tech, consumer discretionary, healthcare and communication services, as higher Treasury yields pressured long duration companies.

World bonds also sold off when yields rose materially on Fed Chairman Powell’s comments that retraction of policy stimulus would happen faster than previously signalled. The US 10-year bond yield surged 27bp, with US Treasury investors now pricing in five interest rate hikes for 2022 with some market participants estimating up to seven compared to the Fed’s previously signalled three hikes. Rising geopolitical tensions, tightness in energy markets, robust demand recovery and persistent global supply chain stresses all have inflationary consequences.

Oil surged again on robust demand, falling inventories and escalating Russia/Ukraine tensions. Iron ore also rallied by double digits, advancing on potential supply disruptions from Australian producers and robust Chinese demand. Precious metals gold and silver were softer on Fed hawkishness and the rising prospect of positive real interest rates at some point.

The US dollar strengthened against the other majors, driven largely by the prospect of higher interest rates, rising against the British pound, euro and yen.

As is expected during falling markets, the Foord global funds performed near the top of their respective peer groups this month. The flagship Foord International Fund performed true to label, even delivering a positive return amid the selloff. The fund is cautiously positioned with extensive hedging of the expensive US S&P 500 Index. Within equities, top holdings FMC Corp and CVS Health gained to buck the negative trend, but investment in leading global copper miner, Freeport-McMoran detracted.

The Foord Global Equity Fund’s outperformance was driven by consumer discretionary, communication services and technology allocations.

Market outcomes in January 2022 (and thus far in February) seem to vindicate our more cautious positioning. There may well be a path to an orderly management of inflation that does not result in more market turmoil, but the risks of a potentially bad outcome are high. Foord’s portfolios are actively managing the downside risks as per our safety-first approach.


08 Mar 2023


In early February, the US Federal Reserve announced its eighth interest rate hike this cycle. The smaller 25bps increase takes the federal funds rate to 4.75%. With headline inflation slowing, investors were quick…

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03 Mar 2023


‘Markets in a nutshell’ is Foord Asset Management’s monthly overview of market movements.

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