January 2022

• Global markets experienced significant volatility in January as investors reacted to rising inflation, aggressive central bank tightening expectations and sharply higher bond yields.
• Technology and growth stocks came under heavy pressure globally as interest rate expectations increased.
• The Federal Reserve signalled that interest rate increases and balance sheet reduction would begin soon to combat inflation.
• Energy and financial sectors outperformed amid rising commodity prices and higher yields.
• Emerging markets delivered mixed performance due to tightening global financial conditions and geopolitical uncertainty.
• Commodity prices strengthened further as supply constraints and geopolitical risks intensified.

Asia (ex. Japan)

Asian markets outside Japan experienced mixed performance during January as rising U.S. bond yields and tightening monetary policy expectations pressured technology-oriented sectors. Chinese equities weakened initially due to concerns regarding slowing domestic growth and ongoing regulatory uncertainty.

However, Chinese authorities introduced further monetary easing measures to support economic activity, helping stabilise sentiment later in the month. Semiconductor demand remained supportive for Taiwan and South Korea despite broader technology sector weakness.

Europe

European equities delivered mixed results during January as rising inflation and tightening monetary policy expectations increased market volatility. Financial and energy sectors outperformed due to higher bond yields and surging commodity prices.

Economic recovery remained broadly supportive overall, though investors increasingly focused on inflation risks, energy shortages and growing geopolitical tensions involving Russia and Ukraine.

United States

U.S. equities experienced sharp volatility during January as investors rapidly reassessed growth stock valuations amid expectations for aggressive Federal Reserve tightening. Technology and speculative growth sectors recorded significant declines.

The Federal Reserve strongly signalled that interest rate increases would begin in March, while also preparing markets for balance sheet reduction. Treasury yields rose sharply as inflation remained near multi-decade highs.

United Kingdom

UK equities outperformed several major developed markets during January as energy, mining and financial sectors benefited from rising commodity prices and increasing interest rate expectations.

The Bank of England continued tightening monetary policy to address elevated inflation, while domestic economic activity remained relatively resilient despite rising living costs.

Japan

Japanese equities weakened during January as global technology sector weakness and rising U.S. yields pressured investor sentiment.

However, exporters remained relatively supported by weaker yen conditions and improving external demand, while the Bank of Japan maintained highly accommodative monetary policy settings.

Emerging Markets

Emerging markets delivered mixed performance during January as rising U.S. yields and stronger dollar conditions created headwinds for capital flows and higher-risk assets.

Commodity-exporting economies benefited from elevated energy and metals prices, while Chinese monetary easing measures helped support broader Asian sentiment.

Commodities

Commodity prices strengthened significantly during January as geopolitical tensions, supply constraints and strong demand conditions continued supporting markets. Oil prices surged to multi-year highs amid concerns regarding Russian supply risks and limited spare production capacity.

Industrial metals remained elevated due to infrastructure spending and energy transition demand, while gold prices stabilised despite rising bond yields as inflation concerns remained dominant.