Off to a Rough Start

Monthly Market Snapshot: January 31, 2022

Highlights

Global equity markets are off to a rough start in 2022 with the MSCI AC World Index tumbling 5.0% in January as investors considered global central bank tightening. In the United States, the tech-heavy NASDAQ fell into correction territory, but finished the month down 9.0%. The S&P 500 held up better, but still declined by 5.3%. Returns overseas were also negative with European and Japanese stocks dropping 4.3% and 5.1%, respectively. Emerging market equities closed the month 1.9% lower. The 10-year U.S. Treasury yield surged 27 basis points to close the month at 1.78%.

At the start of January, investors were pricing in three Fed rate hikes in 2022. Now, investors are pricing in five rate hikes from the Fed in 2022 with some on the Street suggesting that seven may be possible. This rapid change in monetary policy expectations forced investors to de-risk in some of the frothier areas of financial markets, particularly in the technology sector.

Citi’s Global Investment Committee (GIC) maintains a +6.0% overweight on Global Equities and a -6.0% underweight on its Fixed Income and Cash allocation. The Committee recommends upgrading portfolio quality by seeking investments in firms with sufficient profitability to raise payouts.