June 2022

Monthly Market Update

Overview

Global equities picked up the pace across the week, closing higher with a relief rally spurred by signs that hawkish central bank policies may be meeting their goal of curtailing inflation. In the US, the S&P 500, Nasdaq composite and Dow Jones, closed higher despite data pointing to slowing economic growth. European indices also closed higher with lower energy prices providing a much-needed relief. The STOXX 600, French CAC 40 & British FTSE 100 closed higher. The German DAX closed flat, with German officials warning of reduced economic output and hampered growth on the horizon, Germany seeing a notable reduction in Gas flows from Russia. On the commodities front, Oil saw an uneventful week, with recessionary concerns weighing on demand prospects. The Brent contract closed the week flat at $113.12, while the West Texas Intermediate (WTI) gained 0.99% to reach $110.65. Gold recorded a 0.56% dip, closing the week at $1826.85 per Oz.

 

Outlook: Russia’s invasion of Ukraine—and the Western response to it—will exacerbate the supply-demand imbalance that lies at the heart of the global inflation surge. Reducing trade with a current account surplus country via sanctions and boycotts means that the rest of the world needs to produce a larger share of what it consumes. The potential shift is fairly small at an aggregate level, as Russia accounts for less than 2% of global goods trade and GDP. It is considerably larger in oil, where Russia supplies 11% of global consumption. And it is huge in natural gas, where Russia supplies 17% of global consumption and as much as 40% of Western European consumption as of 2021. Unfortunately the oil price increase is hitting a US economy that is already overheating. We remain cautious in the short term, yet pro-risk over the long term and believe that buying high quality, profitable, blue-chip equities with strong balance sheets, positive cashflow yield and high dividends will most likely result in double digit return in the next 12 months.

Developed Markets

North America

The S&P 500 was lifted out of bear market territory, erasing losses from the week as signs of slowing inflation helped by dipping energy prices gave way to a relief rally. The S&P 500, Nasdaq composite and Dow Jones industrial average rose by 5.79%, 7.49% and 5.42% respectively. Data pointing to slowing economic growth across the US was interpreted as positive news, with lower levels of growth allowing for easing of inflationary pressures. One such measure came from the Chicago Federal Reserve reporting an 8-month low on its gauge of national economic activity. In addition to this, S&P Global’s Manufacturing PMI (Purchasing Managers Index) also came below estimates in June (52.4, below estimate of 56). S&P’s services gauge also missed estimates, reaching its lowest levels in 6 months. Investors widely expect benchmark rates to reach 3.5% this year. Fed Chair Jerome Powell added to this, stating that the US economy is currently very strong and able to withstand tighter monetary conditions. Powell also warned that inflationary surprises could still derail progress, adding that a recession still remained “a possibility”. This comes after the Fed raised its main interest rate by 0.75% the week before – the highest hike since 1994, with Inflation reaching a 40-year high of 8.6% in May. Adding to this, Treasury Secretary Janet Yellen said that she expects the U.S. economy to slow in the months ahead, but added that a recession is “not inevitable” and can be avoided. Yellen also spoke of consideration to a federal gasoline/petrol tax holiday, in hopes of helping vehicle owners. Many lawmakers have discussed the proposition, with the average gasoline price reaching $5 per gallon across the nation. Tax currently sits at $0.184 per gallon. Following the monetary tightening estimates, the International Monetary Fund (IMF) revised downwards its forecast for US economic growth from 3.7% in April to 2.9% (June) in 2022, citing elevated energy prices and tighter monetary policies as the key deterrents to economic growth.

Europe & UK
European indices rose with their US counterparts, marking a departure from their 3-week losing streak. The Pan-European STOXX 600, French CAC 40 and British FTSE 100 rose by of 2.40%, 3.24%, 2.74% respectively. The German DAX closed flat as Germany warned of an economic slowdown, with officials warning of a harsh winter as gas reserves continued to decline. The German Economic Ministry announced the start of the second phase of its three -phase emergency energy plan, with Russia systematically reducing gas deliveries. The second phase, known as the “alarm phase” allows utility firms to pass the higher energy costs onto customers, in an attempt to reduce demand. enables utility firms to pass on high gas prices to customers and thereby help to lower demand. German officials remain considered, as the 13th of July marks a 10-day closure of the Nordstream 1 pipeline, as a part of standard annual inspection. Some worry of a total stop of gas exports to Germany from Russia after this date. Germany relies on Russia for approximately 35% of its total natural gas imports, pushing the nation along with Austria and Romania to reopen some coal plants. Compounding this concern, the EU’s largest economy saw a drop in economic momentum, the German flash PMI falling to 52.4 in June from 55.0 in May. The flash PMI reading for the Eurozone recorded similar drops, reaching its lowest level since the beginning of 2021 at 51.9 for June (dropping from 54.8 in May). The PMI decline was underpinned by an overall drop in consumer confidence, having tumbled -23.6 points in June according to the European Commission (EC). Officials in the UK expressed concern over continuing price pressures, inflation having accelerated to 9.1% in May – marking the highest levels in 13 years. Meanwhile, Russia defaulted its’ on foreign debt for the first time in over a century following the lapsing of two major international bond payments on Sunday. The $100million interest payment was originally due on the 27th of May, with Russia’s attempts to pay in its ruble currency blocked by international sanctions.

Japan
Japanese indices recorded positives across the week, boosted by the Bank of Japan’s’ (BoJ) commitment to maintain its current easy monetary policy regime. The Nikkei 225 gained 2.04%, followed by the TOPIX composite closing 1.68% higher. The recent release of the BoJ’s April monetary policy meeting minutes show that policy members attribute the banding of inflation readings towards the BoJ goal of 2% to the larger increases in energy and food costs, expressing that more can be done by the bank to bring inflation higher (Japan experiencing a largely deflationary environment). With this agreed, members opted to maintain the current policy stance, adding that increasing COVID cases and rising inflation & interest rates in the nations of major trading partners present headwinds to their overall goals. Japan’s core CPI recorded a 2.1% year-on-year in May, exceeding the BoJ’s 2% goal for a 2nd month.

Emerging Markets

China
Chinese indices closed higher to record a 4th consecutive week of positive returns, with President Xi Jinping vowing to support an economy hurt by COVID-related restrictions. The blue-chip CSI 300 index reached its highest level in over 3 months, gaining 2.04%. The Shanghai Composite closed higher as well, gaining 0.99%. The broader Chinese market economy showed signs of a muted recovery off the back of gradual removal of the nations zero-COVID restrictions. Shanghai’s economic activity saw an uptick in June, with businesses restarting and consumers no longer sequestered to their homes. President Xi Jinping looked to cool nerves, stating that his government will look to increase the rate of macroeconomic policy adjustment, placing greater emphasis on social development whilst minimsing the impact of COVID-19. The President’s goals included unemployment of “no more than 5.5%,” a CPI increase of “around 3%” and GDP growth of “around 5.5%.”

India
Indian indices closed higher with investors buoyed by the global relief rally and a dip in energy prices. The BSE Sensex and Nifty 50 rose 2.66% and 2.65% respectively. Unexpectedly, investors also noted strong economic data across May, with rising demand for services and higher output from industries as industries continue reopening from pandemic restrictions. With the higher energy and food costs, India has noted higher inflation levels, pushing the Reserve Bank of India (RBI) to hike benchmark rates by 0.90% this year. The RBI looks to take action to bring inflation down to its target ceiling of 6%. Meanwhile, India’s trade deficit widened to a record high of $24.33 billion in May, thanks to higher gold and petroleum imports. Meanwhile, Indian officials held talks with Sri Lanka’s president and Prime Minister to aid the ailing economy. India looks to add to the $4 billion in loans, swaps and aid already provided. Sri Lanka is currently experiencing the worst economic rout in over 70 years, exacerbated by a foreign exchange shortage crippling the nations imports (food, energy and medication). Sri Lanka is looking to secure approximately $5 billon over the next 6 months to cover basic necessities. Sri Lanka seeks to hold a conference with China, India and Japan, to discuss financing options. A bailout package of $3 billion is still from the IMF.

MENA
The indices across the MENA declined for a third consecutive week, hampered by declining energy prices across the globe. Saudi Arabia’s TASI recorded its worst decline in 6 months, dropping 5.50%, while the UAE’s DFMGI lost 2.48%. In the UAE, Dubai reported a 5.9% growth in GDP across Q1 2022, led by a surge in transport, hospitality, and energy prices. Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and Chairman of the Executive Council said Dubai’s economy reached AED 102 billion during the January-March quarter after hitting 6.2% GDP growth in 2021. In its latest installments of IPOs (Initial Public Offering), Dubai’s Tecom Group raised AED 1.7 billion ($463.2 million) from its outing on the the Dubai Financial Market. The IPO was oversubscribed by a factor of 21. The company’s final share price was set at AED 2.67, giving the group a valuation of AED13.4 billion. Meanwhile, Saudi Arabia’s central bank, SAMA placed approximately 50 billion riyals ($13 billion) as time deposits with major commercial lenders, with the aim of easing its current liquidity crunch. The move came ahead of the US Federal Reserve’s interest-rate hike this month.

Commodities and Forex

Commodities
Oil recorded remained subdued across the week, with hawkish central bank policies and an economic slowdown bringing future demand in to question. The Brent contract closed the week flat at $113.12, while the West Texas Intermediate (WTI) gained 0.99% to reach $110.65. Gold recorded a 0.56% dip, closing the week at $1826.85 per Oz.

Currencies
The US dollar index lost 0.49% against a basket of 6 major currencies, reaching a value of $104.18. Meanwhile, weakness in the Japanese Yen continued, providing a boost to Japanese exporters. The yen remained near a 24-year low against the U.S. dollar, finishing the week at the high end of the JPY 134 range. The Chinese yuan remained firm against the U.S. dollar and ended at 6.69 against the greenback from 6.70 last week.

Commodities

Name24/06/2231/05/2231/03/2231/12/20
WTI Oil ($/barrel)$110.65$114.67$100.28$48.52
Brent Oil ($/barrel)$113.12$122.84$107.91$51.80
Gold ($/oz)$1826.85$1848.40$1954.00$1899.60
Natural Gas ($/mmBtu)$6.22$8.14$5.64$2.54

Currencies

Name27/06/2231/05/2231/03/2231/12/20
Euro (€/$)1.05491.07361.1071.2226
Pound (£/$)1.2271.26051.31351.3653
Japanese Yen (¥/$)135.24128.64121.61103.29
Swiss Franc (CHF/€)1.01131.02931.02131.0821
Chinese Yuan Renminbi (CNY/$)6.68986.67226.3466.514

Index Valuations

Index Return

Equities1 weekMTDQTDYTD
S&P 5006.46%-5.22%-13.33%-17.31%
DJ Industrial Average5.39%-4.37%-8.69%-12.43%
Russell 20006.02%-5.18%-14.45%-20.88%
Russell Midcap6.03%-6.85%-13.96%-18.85%
STOXX Europe 50 (€)2.82%-6.68%-7.36%-15.57%
STOXX Europe 600 (€)t2.43%-6.74%-8.26%-13.78%
MSCI EAFE Small Cap1.78%-9.29%-15.97%-23.06%
FTSE 100 (£)2.78%-5.02%-3.22%-0.44%
DAX (€)-0.06%-8.83%-9.00%-17.42%
FTSE MIB (€)1.81%-9.47%-9.09%-16.49%
CAC 40 (€)t3.34%-5.92%-7.14%-13.39%
SWISS MKT (CHF)3.56%-6.79%-9.80%-13.65%
TOPIX (¥)1.68%-2.40%-4.00%-5.12%
Hang Seng (HKD)3.15%1.98%-0.11%-5.76%
MSCI World5.40%-6.03%-13.67%-18.03%
MSCI China Freet4.56%7.39%9.37%-6.59%
MSCI EAFE2.83%-7.93%-13.04%-18.08%
MSCI EM0.81%-5.84%-10.65%-16.84%
MSCI Brazil (BRL)-1.03%-11.13%-17.09%-3.82%
MSCI India (INR)2.64%-5.56%-10.33%-10.24%

Fixed Income

(24/06/22)1 week %1 month %6 months %YTD %1 year %2 years %
US dollar Adventurous1.72%-5.36%-24.17%-25.13%-23.62%4.36%
US dollar Blue Chip2.00%-2.90%-16.88%-17.53%-13.92%4.12%
US dollar Cautious1.82%-2.32%-14.83%-15.17%-12.67%-2.17%
US dollar Defensive1.54%-1.88%-12.80%-12.80%-11.85%-8.75%
US dollar Performance1.93%-3.89%-19.27%-20.13%-16.19%9.23%

Blend Fund Performance Year To Date:

Blend Fund Performance Since Inception:

Direct Fund Name

(24/06/22)1 week %1 month %6 months %YTD %1 year %2 years %
Aditum Global Discovery0.08%-0.05%----
BlackRock GF World Healthscience USD5.50%-1.65%-8.55%-9.74%-5.66%14.70%
BlackRock GF World Mining USD-7.32%-16.37%-9.20%-10.82%-10.83%43.52%
Emirates Global Sukuk-0.14%-1.26%-7.99%-7.99%-8.12%-3.58%
Emirates MENA Fixed Income-0.29%-1.72%-12.50%-12.50%-11.76%-3.38%
Emirates MENA Top Companies-2.75%-4.82%3.81%3.87%11.62%56.55%
Franklin Gold and Precious Metals USD-4.42%-14.49%-17.98%-19.67%-19.89%-5.65%
Harris Associates Global Equity-1.39%-4.17%-18.34%-19.75%-20.38%26.24%
Loomis Sayles Global Growth Equity Fund0.10%-2.45%-28.29%-28.84%-30.97%-8.22%
Loomis Sayles Multisector Income Fund0.27%-2.14%-12.75%-12.91%-13.12%-5.30%
PineBridge Japan Small Cap Equity3.94%-4.41%-25.87%-25.80%-30.09%-9.30%
UBAM 30 Global Leaders Equity $0.87%-2.08%-25.27%-26.43%-15.96%15.42%
UBAM Swiss Equities-2.99%-8.63%-27.34%-28.01%-21.05%2.10%
iShares US Corporate bond Index0.68%-1.13%-13.12%-13.37%-12.98%-10.54%

Zurich Managed Funds

(24/06/22)1 week %1 month %6 months %YTD %1 year %2 years %
US dollar Adventurous1.72%-5.36%-24.17%-25.13%-23.62%4.36%
US dollar Blue Chip2.00%-2.90%-16.88%-17.53%-13.92%4.12%
US dollar Cautious1.82%-2.32%-14.83%-15.17%-12.67%-2.17%
US dollar Defensive1.54%-1.88%-12.80%-12.80%-11.85%-8.75%
US dollar Performance1.93%-3.89%-19.27%-20.13%-16.19%9.23%

Zurich Mirror Funds

(24/06/22)1 week %1 month %6 months %YTD %1 year %2 years %
ZI Canaccord Genuity Balanced0.48%-4.53%-17.78%-18.99%-17.92%-2.26%
ZI Canaccord Genuity Growth1.21%-4.84%-21.42%-22.90%-20.53%-0.26%
ZI Canaccord Genuity Opportunity1.03%-4.83%-19.28%-20.92%-19.32%2.30%
ZI Emirates Active Managed fund-1.76%-5.09%-20.10%-22.54%-21.93%-5.08%
ZI Emirates Balanced Managed fund-1.50%-4.38%-18.39%-20.38%-20.87%-9.84%
ZI Emirates Emerging Market Debt-0.89%-3.52%-20.77%-21.06%-24.40%-16.09%
ZI Emirates Emerging Market Equity-3.44%-8.76%-24.27%-25.91%-30.24%-8.56%
ZI Emirates Islamic Balanced Managed fund-1.12%-3.50%-12.56%-14.69%-11.84%4.36%
ZI Loomis Sayles U.S. Growth Equity2.83%-4.67%-29.90%-30.55%-27.15%-3.94%

Disclaimer: This document is for information purposes only. This document does not constitute an offer, an invitation to offer, or a recommendation to enter into any transaction, nor does it constitute investment advice. Its contents are derived from sources generally believed to be reliable although no representation is made that it is accurate or complete and we accept no liability with regards to your reliance on the same. Past performance is not necessarily indicative of future results and prices and availability are subject to change without notice. Availability shall be subject to the relevant law and regulation and pursuant to the relevant Fund Prospectus and relating legal documents.  Where overseas investments are held, the rate of exchange may cause the value of investments to go down as well as up. The value of investments and any income from them can go down as well as up and you may not get back the amount originally invested. Chart Source: GSAM and Bloomberg as of close of trading on August 31, 2017. Chart data shows next 12 month P/E ratio from August 2007 to the current period. 12m forward P/E(x) refers to price-to-earnings ratio for the next 12 months, which is a valuation measure applied to respective broad equity indices. Please see additional disclosures at the end of this presentation. All data is denominated in USD unless noted otherwise.† Data is released weekly, as of Monday. If data displays an asterisk: 

* Data is lagged by 1 day.
**   Data is lagged by 2 days.