A Frenzied February

Monthly Market Snapshot: February 28, 2022

Highlights

Global equity markets remained volatile in February as the ongoing conflict between Russia and Ukraine and the prospect of tighter central bank monetary policy dragged indices lower. The MSCI AC World Index is now off 7.5% year-to-date. In the United States, the S&P 500, Dow Jones, and NASDAQ were each down over 3.0% in the month. European stocks underperformed with the EURO STOXX 50 down 5.8% as investors considered Europe’s dependence on Russian energy. Emerging market stocks slipped 3.1%. The 10-year U.S. Treasury yield rose 5 basis points to 1.83%.

The conflict between Russia and Ukraine has gripped markets as it continues to escalate – both militarily and in terms of sanctions. Thus far, Russia’s energy sector has largely avoided targeted sanctions from Europe as the region seeks to limit the collateral damage of surging energy costs. However, a shift in energy supply chains seems assured as nations seek to limit dependence on Russian energy. The conflict’s impact on inflation will be a key consideration for global central banks.

In early March, Citi’s Global Investment Committee decided to add a 4% portfolio weighting to global natural resources as a defensive hedge. We also reinstated a 2.0% overweight to gold. These additions are being largely funded by a reduction in the allocation to both European and Japanese stocks.