Market Trends: April 2022 | BetaShares

Market Trends: April 2022

BY David Bassanese | 6 April 2022

Global Equities – March rebound

Global equity returns enjoyed a modest 2.6% rebound in March, after a decline of 1.0% in February and a larger 6.1% decline in January. The rebound appears to reflect optimism that prospective U.S. interest rate increases should not unduly slow global economic growth anytime soon, given good current underlying momentum in activity. Hopes of a peace deal between Russia and Ukraine also sporadically buoyed investor sentiment.

Reflecting continued expectations for around 6 to 8% earnings growth this year and next, forward earnings rose a further 1.1% in the month, although the expected level of earnings in 2022 and 2023 are no longer being revised up in the way evident through much of last year. Current expectations are consistent with 6% growth in global forward earnings by year-end. The stronger gain in equity prices – relative to earnings – saw the forward PE ratio edge back up to 16.7 from 16.5 at end-February.

The rebound in equities came despite a further notable lift in bond yields, with the yield on U.S. 10-year bonds rising from 1.83% to 2.34%.  As a result, the earnings yield-to-bond yield gap (EBYG) fell to 3.6% from 4.2% – or the lower end of its range of recent years.

In terms of broad trends, the relative performance of the U.S. market remains upward, despite the pull back in technology performance over recent months. Emerging markets also remain in a relative performance downtrend, with defensive sectors (consumer staples, energy, health care and utilities) beating cyclical sectors and value still largely beating growth.

Global equity trends

Reflecting commodity price gains associated with the Russian invasion of Ukraine, energy (FUEL) and food (FOOD) producers enjoyed the strongest gains among hedged global equity ETFs in the month. That said, there were solid gains among most other exposures also, though global banks (BNKS) and European stocks (HEUR) were relatively weaker, likely reflecting concerns of the impact of Russian sanctions on the global financial sector and the war-related pressures on Europe. FUEL, FOOD and MNRS are the top three performing exposures on a 6/12 month basis, and have positive trends in both outright terms and relative to the global market.

Among unhedged exposures, cybersecurity (HACK) enjoyed the strongest returns in the month, with emerging market exposures (ASIA) producing the weakest returns. Along with HACK, relatively defensive/value exposures such as UK stocks (F100) and the equally-weighted S&P 500 Index (QUS) are the top three relative performers on a 6/12 month basis.

Australian Trends

There were good gains across most Australian equity exposures last month, with the overall market returning a solid 6.9%. Resources (QRE) and technology (ATEC) enjoyed especially strong returns. The strongest relative performers at present are resources and the fundamentally-weighted large-cap index (QOZ).  Despite last month’s strong bounce back, the longer-run outright and relative trends for local technology remain negative.

BetaShares Select Australian Equity Funds – Performance

Source: Bloomberg, BetaShares. Index performance doesn’t take into account fund fees and costs. You cannot invest directly in an index.
Past performance is not indicative of future performance of any index or funds. Funds in each section ordered by 6/12 mth return performance.

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* Equity theme proxies: US: S&P500; Non-US: MSCI Ex-US Developed Markets Index; Growth vs. Value: MSCI Global Growth and Value Indices; Emerging markets: MSCI Emerging Markets Index; Australia: S&P/ASX 200 Index.
** Ranking based on average of 3 and 6 month performance and 6 and 12 month performance, excluding latest monthly return performance.
*** Trend: Outright trend is up if the relevant NAV return index is above its 10-month moving average and down if the index is below this moving average.  Relative trend is up if the ratio of the relevant NAV monthly return index to the return index for the MSCI ACWI is above its 10-month moving average, and down otherwise.

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