Quarter in Review Q4 2022

Key themes

Equities generated positive returns over the fourth quarter; performance within fixed income was more mixed.

A change in tone from global central banks towards the end of October contributed to a recovery in both asset classes, as speculation grew that the pace of interest rate rises would soon begin to slow.

Equities and bonds then fell again in December, with markets wary of recession risks in 2023 and central banks warning that policy would likely remain restrictive for longer.

Markets snapshot

The MSCI AC World equity index rose 7.5% (0.9% in euros).

US equities lagged, rising 7.1% (-1.7% in euros), as some large cap technology companies suffered from a poor earnings season.

Europe ex UK equities rose 11.1% (10.3% in euros) as hopes grew that the recession in Europe might be milder than initially feared.

Pacific Basin equities rose 10.7% (6.2% in euros) on hopes for a recovery in Chinese and regional growth in 2023.

Japan underperformed, rising 3.2% (4.0% in euros), as the Bank of Japan announced a surprise change in policy by raising the target range for the 10-year yield.

The Eurozone >5-year bond index fell -2.3%. The German 10-year yield rose to an 11-year high of 2.57% by year-end on the back of a much more hawkish European Central Bank.

The euro was strong during the quarter with EUR/USD recovering from below parity to 1.0705.

Commodities rose 3.4% (-5.1% in euros), benefiting from the expected recovery in the Chinese economy as it fully reopens in 2023. Brent oil fell -2.3%. Oil faced several factors pulling in opposite directions which left the price only slightly changed over the quarter. European gas prices remained volatile and were down -56.0%. Storage levels remained higher than initially anticipated as a cold weather spell across Europe ended.

Gold rose 9.8%, supported by a weaker US dollar and slightly lower US real yields. Metals were generally firmer on hopes for a better growth outlook in China through 2023, with copper up 10.7% and aluminium rising 10.0%.



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