February 2022 quarterly market and portfolio performance review

As part of our ongoing service and client commitment, we aim to keep you informed on stock market performance, portfolio reviews and explain some of our methods and reasoning behind our portfolio planning. It’s fair to say this quarter has begun with some trepidation…

Market commentary

Predominantly the latter part of 2020 and the majority of 2021 has seen the ‘great rebound’ in the stock markets. From the market lows of March/April 2020 in the eye of the Covid pandemic storm, up until late 2021, equities recovered very strongly, with most global indices reaching, and in some cases passing, their pre-pandemic highs.

We have seen a sell-off in some equity markets in the last quarter going into 2022, especially with the increasing spike in inflation – much of it driven by spiralling energy costs and the Covid impact on the supply chain has spooked markets to a degree. It is likely that the fiscal easing will be tapered by central banks and that interest rates will rise with the expectation of several small increases in rates during 2022, globally, and at home.

That said, it is hoped that this inflation spike is temporary. Furthermore, many developed countries’ economies have spare capacity and households in these same countries are sitting on accumulated unspent savings from the pandemic lockdown. It is also likely that central banks will be prudent in their speed in raising rates as they have a fine line to tread so as not to derail the post-COVID recovery. Therefore the global economy may be poised for another year of growth, albeit slower than 2021. 

The main ‘unknowns’ for 2022 are:

1. How long the spike in inflation lasts
2. The possibility of further COVID-19 lockdowns as infection rates increase again or new variants emerge.
3. Central banks policies over interest rates

In the immediate short term, inflation could reach uncomfortable levels when the full effects of energy price hikes are felt domestically. Although it should decline thereafter, especially if the supply-chain issue can also improve.

Regarding COVID-19 risks, the success so far of the vaccine roll-out and the more recent approval of pills to treat infections have made investors more relaxed. However, the recent Omicron variant does demonstrate that these risks can quickly return.

Portfolio’s overview

The Legal and Medical Investment Committee met on January 18th to review the position of both the portfolios and the general economic outlook. Below is a summary of our Legal & Medical portfolios and their cumulative performance over 6 months, 1 and 3 years.

Across the board, performance has been strong over 3 years, even for the more defensive and cautious portfolios. This has been driven by conviction over-investment in a range of global equity markets where we have benefited from some of our Active Fund managers taking bullish positions in technology stocks. More recently, we rebalanced some of our portfolios to take an increased position in UK stocks as this sector appeared a little undervalued when compared against its global peers.

More recently, the inflation threat has caused a sell-off in some sectors, as fears over interest rate rises have fed through, with concerns over the ability of some companies to make profits at the same level. These fears have resulted in some quite savage volatility in the early weeks of 2022, impacting shorter-term performance, which will have turned the cumulative figures negative for a number of our portfolios over the last 6 or 12 months.

However, we do not plan to react to the volatility we’ve seen since the start of the year, as history tells us – and 2020/2021 are good recent examples – it is usually best to look through these developments and focus on long-term returns. Our aims in building and running our portfolios continue to be for well-managed funds, which themselves invest in companies with sustainable earnings. It remains the case that investment is a long-term game for long-term gain. 

Needless to say, however, should market fundamentals and information change significantly, then we would, of course, need to consider steps to adjust portfolios accordingly.

There is no right or wrong ‘time’ to invest, and no one can predict where the peaks and troughs lie now or in the future. To use the old mantra  “it is not timing the market, but time in the market that matters”.

Active Portfolios

You may need to scroll left and right if you’re viewing the table below on a small screen.

Passive Portfolios

Green & Positive Portfolios

*3 year figures available summer 2022

Collective Portfolios

(for personally-held Investment Accounts)

Figures as at 01 February 2022

As always if you have any concerns or questions regarding your portfolio or a general stock market query, do please get in touch.