January 2022 market review

January 2022 market review

January was the month in which fears around inflation and the tempo of monetary and fiscal policy adjustment finally sent markets plummeting. The Nasdaq-100, for example, was pulled down more than 10% from its November closing record. That’s a market correction.

Locally, retail inflation printed at 5.9% and the SA Reserve Bank (SARB) hiked the repo rate to 4%. Four members of the MPC voted in favour of a 25 basis points hike, while one member voted to hold the rate. The SARB also flagged upside risk to inflation. Prime rose to 7.5%.

Big tech tumbles in January

After several months of racing ahead, world stock markets stumbled in January. The MSCI World index (developed market global equity) lost 8.20% in rand terms for the month. The strengthening rand did add to this negative return, as it gained 3.07% against the US dollar and 4.45% against the euro during the month. Tech stocks were hit particularly hard, with the Nasdaq-100 down 11.31% in January. The local equity market kept its composure amid the global correction and the FTSE/JSE All Share Index (ALSI) added 0.86% in total returns for the month. The local listed property index (SAPY) gave a return of -2.85%. SA bonds (ALBI) gained 0.85% during the month and cash (STeFI) returned 0.34%.

The past year has seen a rotation from Growth to Value

Evaluating the past 12 months, all major market indices delivered strong returns. Property was the best performing asset class at 37.44%, followed by the ALSI at 23.89%. Among the stocks listed on the ALSI, Value-style stocks were back in favour at 42.50% over the past year. Growth stocks yielded a total return of 8.93% in comparison. The ALBI returned 8.49% for the year, and cash gave 3.85%. The rand weakened 2.77% against the US dollar and strengthened 5.17% against the euro. Looking towards international markets, the MSCI World Index gave South African investors 19.76% in rand terms.

World stocks remain the 5-year winner

Over the past five years to January 2022, the ALSI returned 10.63% per year. In comparison, the world stock market – as measured by the MSCI World Index – returned 16.42% annualised in rand terms over the five years to 31 January 2022. SA bonds gave 8.95% per year and cash 6.19%. Listed SA property (the SAPY) is lagging other asset classes significantly at -5.21% p.a.

Table 1: Total returns to 31 January 2022

Source: Morningstar | Total returns annualised to 31 January 2022