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Market Update: March 2022

February saw a continuation of the January volatility, with geopolitics weighing on risk sentiment after Russia invaded Ukraine. Commodity prices are rising quickly, with oil trading well north of $100/barrel, and agriculture and metals prices also increased over the period. Russia is a large supplier of energy (oil and gas) to the global economy, and Ukraine is a significant contributor to the global agriculture market, which is why prices have risen as quickly as they have. Additionally, commodity stocks were already pretty low due to a variety of reasons, so the combination of rising inflation, tight supplies, and geopolitical uncertainty created a potent mix for rising prices.


Looking ahead, we expect things to remain choppy for the next couple of months, as geopolitical risk is likely to remain elevated, and the recent rise in commodity prices will flow through to inflation. With that in mind, we continue to recommend a quality focus within both equities and fixed-income, and well-diversified portfolios that include some level of exposure to commodities. As shown in the figure below, energy has been the lone sector in the black so far this year.


From a policy perspective, it’s likely that the Fed will raise interest rates at their March meeting by 25 basis points, barring any exogenous shocks between now and then. This would be the first interest rate increase since the onset of the Covid-19 pandemic, and since it has been well telegraphed, we do not expect a market reaction to the interest rate hike itself, as there is likely to be more emphasis on the Fed’s thoughts on the future, given complicating factors such as oil prices and the Russia/Ukraine conflict.

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