April 19, 2022

Financial Markets

  • Most global equity markets sold-off for much of the quarter as high inflation, the onset of monetary policy tightening, continued supply chain issues, and the impacts related to the Russian invasion of Ukraine soured investor sentiment. Markets in commodity heavy countries had strong gains benefiting from the supply issues.
  • Global bond yields moved up significantly as high inflation spurred interest rate hike expectations. S. Treasury bond yields moved up to the highest levels since early 2019.  U.S. bond returns were the worst in a decade.
  • Oil prices rose to over $100 per barrel, the highest since 2008 and natural gas prices in Europe surged due to supply worries made worse by the Russian invasion of Ukraine and related sanctions.
  • Prices for agricultural commodities and industrial metals spiked, some to all-time highs, due to supply disruptions from the Russia/Ukraine war since those countries are key suppliers of several commodities.

Overview of the Economy

  • Earnings reports for the fourth quarter were robust with a majority of companies beating analyst forecasts.
  • The Omicron COVID wave caused a dip in industrial and service activity early in the quarter, but new orders and production increased again in February and March.
  • TheS. labor market remains tight with the unemployment rate dipping to 3.8% and a ratio of 1.8 job openings for every unemployed person.
  • The consumer price index (CPI) in several countries hit multi-decade highs. The CPI in the U.S. rose to 7.9%.
  • Economic activity in China slowed in part due to new COVID control lockdowns in several large population cities.

Notable Events

  • The Federal Reserve Open Market Committee (Fed) raised its policy rate to 0.25%-0.50% from near zero.