Investment

April General Markets Comments

by Pierre Mouton

April General Markets Comments

“Been dazed and confused, for so long, it’s not true” – a tribute to the mighty Led Zeppelin

Yes, it has been dazed and confused for investors, and it has been so for quite a long time now.

Russia-Ukraine war has not helped, but this alone can’t explain the very complicated market conditions we’re facing this year. Commodity prices had started to rise significantly before the conflict began, like interest rates and inflation, but this did not prevent equity markets from posting spectacular returns in 2021. So what’s the problem this year, notwithstanding this war (and without minimizing or underestimating its impact)? Perhaps the message from many Central Banks is what frightens investors the most: we’ve been used to having this kind of FED/ECB “put” each time things turned sour for so long, that their hawkish message today triggers discomfort and a feeling of entering unchartered territories.

At some point, Led Zeppelin’s song goes “lots of people talk, and few of them know”, which seems to echo these days’ fuss: Growth addicts tell you that IT stocks are a screaming buy, while Value disciples explain to you that it’s only the beginning of a long cycle for Cyclicals; Gold bugs urge you to go full blast on the shiny stuff and fixed-income optimists consider that today’s yields are attractive; but what happens if inflation fades away? Gold falls and bonds perform? And if inflation shoots up? So does Gold, and bonds collapse? Perma-bears maintain their prediction of an Armageddon, but Perma-bulls want you to increase risk.

As we’re in the middle of decisive earnings reports from a lot of companies, skies could clear up, or not: it will be extremely interesting to focus on the outlook, with many unknowns which have to be addressed: China lockdowns, supply chain, costs inflation and pricing power, Russia-Ukraine consequences, production bottlenecks and final demand.

April was painful; it has been a volatile and negative month. The S&P 500 lost 8.8%, the MSCI World 8.4%, the Nasdaq 100 cratered 13.4%; Europe fared relatively well (-1.1% for the MSCI Europe), but the Euro fell 4.9% versus the dollar. In the same vein, the Topix only receded by 2.4%, but the JPY sank 6.7% versus the dollar.

As credit had a very bad month, like Government bonds, like equities and like most currencies (barring the dollar), the only bright spot was Commodities with Oil rising again (+4.4%) and the Broad Commodity Index adding 4.4% as well, but it’s not supposed to help equities. Even Gold retreated by 2.1%. Dazed and confused, indeed. Hopefully not for too long.

 

 

 

 

 

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS PARTNERS SA provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data or other financial instruments referred to in this general comment. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the FINMA cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners Group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request. © NS Partners Group

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