January Market Commentary

Commentary by Luna Investment Management – a Thornbridge Appointed Representative

The feel good, happy new year feeling hasn’t lasted long. Major global bond and equity markets both posted negative returns during the first month of the year. Certain sectors and styles have been more impacted in the sell-off, with Technology and Growth style companies feeling the impact more heavily. On the flip side, the Oil price has moved to an eight year high and Financials have performed better.

There have been a number of triggers for the moves in markets this year. The first being a recognition that global central banks are behind the curve and interest rates look likely to move higher. The political instability between Russia and the Ukraine has only added to investors nervousness. It is also important to remember that we have seen a significant recovery in economies and stock markets over the last two years. The S&P 500, where the bigger more recent falls have been seen, had more than doubled from the March 2020 low to the end of 2021 – there is definitely an element of profit taking in markets.

It’s not all been bad news… We seem to be moving in a more positive direction on COVID again and in January the end of Plan B measures introduced in England to combat the Omicron variant, compulsory mask-wearing on public transport and in shops, guidance to work from home and vaccine certificates. Also, in its new set of forecasts published 25 January, the IMF lowered its UK 2022 GDP growth forecast to 4.7% from 5.0%. Despite GDP growth being revised lowered in the UK, it is important to remember a 4.7% annual figure is significantly above 2% trend GDP growth in the UK and represents a strong year ahead. 

To conclude, we are conscious this has been a more volatile start to the year. Investment markets often go through periods like this. Whilst short term volatility can feel uncomfortable, we remain long term investors and look to take advantage of opportunities that present themselves in environments like this.

January Market Commentary