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LCP Investment Summary - February 2022
Posted on 3 March, 2022 by Administrator
Global equity markets fell 2.5% in February (in € terms). By month end, Russia had invaded Ukraine further adding to the volatile market conditions investors experienced during the month. Major index providers have come under pressure to remove Russian stocks from their indices.
Russia currently has limited direct exposure in global markets, making up roughly 0.2% of the FTSE All World Index (although this percentage is higher for emerging market indices), and has no direct exposure to Ukraine. Countries throughout the world imposed heavy economic and financial sanctions against Russia in attempts to pressure Russia into stopping their invasion.
The EU, US and the UK have placed tough sanctions on Russia’s Central Bank, restricting Russia’s access to foreign currency reserves, with sanctions also including the removal of several Russian banks from the main international payment system (SWIFT). Commodities rose 8.8% over the month, largely driven by concerns over disruption to the global supply chain. With Russia being one of the major suppliers of Europe’s oil and gas, fears over reduced supply caused prices, particularly gas, to rise sharply. The global economic consequences resulting from the war remain uncertain, with continued escalation in Ukraine causing major geopolitical risk and concern for what lies ahead.
Longer-dated Eurozone bond prices fell 3.3% over the month, with the yield on the AAA Eurozone 15+ Year Index rising to 0.37% by month-end. The Euro Broad Sovereign 10+ Year Index price fell 3.9% with its yield rising from 0.92% at the end of January to 1.16% by month-end. Corporate bond prices fell during the month, with credit spreads widening, as investors remain cautious as they face challenging market conditions.
Eurozone inflation continued to exceed the ECB’s 2% target, with the ECB no longer ruling out interest rate increases in 2022. Pressure is building on Central Banks as they cope with rising inflation and geopolitical tension.
Sample DC Schemes
Our three sample DC Strategies all fell as most asset classes were down for the month.