The first month of 2022 draws to a close today, and I think it’s fair to say it has been a bumpy ride so far. There have been very few hiding places for investors, with equities, bonds, and cash all looking set to post negative returns for the month. In our view, equity markets remain in a broader upward trend and no change to asset allocation is warranted at this juncture.
The overwhelming narrative for markets in 2022 has been that of inflation and interest rates. There was more guidance from the Federal Reserve last week, who kept rates unchanged as expected. However, the real focus for markets was on the post meeting commentary from Chair Jay Powell. In summary, the market has now priced in 5 0.25% hikes in 2022. The Fed will also no longer reinvest the proceeds of maturing bonds, which will reduce the amount of assets on their balance sheet.
On the earnings front, Apple recorded $124.0 billion in revenues for the full 2021 fiscal year, their best ever figure. And whilst it is difficult for the stock to keep up with soaring expectations, it’s worth noting just how far the company has come since the launch of the iPhone in 2007. In that first year they sold 1.37 million iPhones – it’s estimated in 2021 they sold that amount every 2 days. In the week ahead, Amazon and Alphabet will garner most of the attention as they report their latest earnings, whilst the Bank of England is expected to raise rates when it meets on Thursday.