7 with 7: April 2022 Market Update
Your monthly market update giving you information on seven key things that are happening in the world that impact your money.
1. Frightening news stories
You may have heard talks of a global recession over the past few weeks.
With a war fuelling already high inflation and energy prices, it's understandable that you may be concerned.
Lots of forecasters are saying that while many are going to be hit hard by the living cost crisis, a global recession can be avoided. This is because lots of industries are flourishing, and lots of Governments will continue to use financial stimulus to hopefully avoid a recession.
The cost of living is at a 30-year high.
Energy costs were already on the rise, and then the war in Ukraine has had a huge impact on the price of energy.
Inflation is currently around 7%.
A healthy rate of inflation is 2%.
The bank of England will hammer its biggest tool in tackling inflation with rising Interest Rates, and we expect rates to be at 2% by the end of the year. We fully hope inflation will start to curtail in the Autumn and into the end of the year - while rates will still be high, it will be a case of riding out this high inflationary period out until next year.
3. War in Ukraine
The attempted Russian invasion and takeover of Ukraine continues.
Ukraine continues to fight back.[TF3]
Mr Putin did not plan for this level of Ukraine[TF4] resistance and will have hoped to have had his legacy (the invasion) wrapped up by now.
As the war continues, the supply of oil, wheat and other resources are affected.
With Ukraine supplying the world 25% of its[TF5] wheat, there's also a knock-on effect on the supply of rice, as rice is a notable replacement for wheat.
The longer this conflict continues, the longer uncertainty continues. However we are seeing different countries around the world pull together strategies to combat the reliance on oil from this part of the world. We hope from not only an investment perspective but of course a humanitarian perspective that this conflict ends soon.
Rising Covid-19 cases and a zero Covid-19 policy lead to lockdowns, which has a detrimental effect on supply chains.
Chinese stock markets have not performed well.
Zero Covid-19 policy is hard to understand from a UK perspective and will hamper supply chains, however China is one of the world's largest economies and will want to ensure this remains. They have pledged a lot of money to infrastructure and carbon neutral energy and will want to see these industries boom.
Being the world's biggest economy, whatever America does is important for the rest of us.
America has a lot of money already in its economy and is slowly seeing people go back to work after Covid-19.
The US is also producing more of its own oil to bring the price of a barrel down.
The S&P was a standout performer last year.
America has the tools to put up a good economic fight and are implementing measures such as buying back its own bonds and increasing interest rates to battle the current economic climate.
6. Netflix & Jet2
You may have heard that Netflix's stock price has fallen this week.
As people get back to work and simply stop binge watching TV at home all day, many people have unsubscribed. This has caused the profits of the company (and therefore it's value) to fall.
A household name and component in a lot of investment portfolios.
In the opposite direction the share price of Jet2 has increased as more people get away on holiday.
This shows a prime example of how stocks work. Over the past couple of years, Netflix has been a very high performer and now the value has fallen. This is where an active fund manager will have sought out the danger and sold this stock, should they feel it won't recover in the long-term, or hold and gain the bounce-back. This is what people who manage your investment funds are specialists in.
While one well-known stock falls, another rises, and this highlights the sheer importance of one of the key parts of our investment strategy: diversification.
Q1 performance wasn't great - we've had Covid-19, inflation, war in Ukraine, supply chain issues to name just a few things that have spooked the markets.
However over the long term (which is generally seen as anything over 5 years), if we look at how markets have always done we can see that wealth is created over the long-term period, with time in the market.
Hold the fort and have trust in your financial adviser. Long-term multi asset portfolios will prevail. The graph below shows the performance of the FTSE 100 since 1990.
We hope that if you have any concerns that you simply get in touch with us, and we can answer any questions you may have.