OUTvest Market Commentary - February 2022

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18 March 2022
February was dominated by geopolitical events; the events in Russia and Ukraine has sent local and global markets into a roller-coaster ride. Moscow is one of the biggest oil producers in the world and Kyiv a major exporter of wheat and corn, the tension is expected to push local and global inflation higher.

South African Markets 

February was dominated by geopolitical events; the events in Russia and Ukraine has sent local and global markets into a roller-coaster ride. Moscow is one of the biggest oil producers in the world and Kyiv a major exporter of wheat and corn, the tension is expected to push local and global inflation higher. This may make it more difficult for the South African Reserve Bank to manage inflation in 2022  .

Finance Minister Enoch Godongwana presented his maiden budget, and thankfully it was labeled a good and responsible budget, and mostly welcomed by most market participants. The most notable comment coming out of the budget, is the R182 billion more revenue than last year’s estimate thanks largely to the increased income from our mining companies as a result of the boom in commodity prices coming out of the Covid-19 pandemic.

Good news for our retirement fund clients, the regulations governing what pension funds invest in will be amended giving more freedom to allow for more offshore exposure and an increase in infrastructure investment. The team, in conjunction with our investment managers will be working through the changes we need to make to the funds to ensure that they continue to deliver solid peer group performance.   

The current budget deficit is 5.7% of GDP and is expected to decrease to 4.2% of GDP by 2024/2025, this change potentially means that the government may not need to increase borrowing any further in 2024.

Factors like Covid-19 lockdown restrictions, the July unrest, the slowing down of the commodity prices, and other global developments contributed to the projected economic growth in South Africa being reduced to 4.8%, from the 5.1% projected in last year’s mid-term budget speech.

Inflation slowed in January to 5.7% from 5.9% in December, the major contributor to the print was fuel prices driven mainly by the surge in oil prices. Inflation is expected to remain elevated as Brent crude reached levels only seen in 2014 and will be influenced by the invasion of Ukraine by Russia.    

Despite the chaos the local bourse equity ended February in positive territory, this was mainly driven by energy and resources shares.  Russia produces 40% of the world’s total palladium, it is the 3rd in terms of gold production and oil production.  The sanctions against Russia and the conflict with Ukraine have elevated most of the commodity prices which filtered through into the local market as the South African is dominated by Resources shares. Anglo Platinum, Sibanya Stillwater and Northam Platinum gained 29%, 26% and 23% respectively for the month of February. A surprise turn of events former market darlings – Naspers and Prosus lost nearly 22% and 26% respectively in February, the pair has nearly lost half of their value in the past year. This can be partially attributed to the heavy hand Beijing has on Tech companies, with food delivery services companies such as Meitum (20% owned by Tencent ) being forced to cut fees.

South African Listed property was down by more than 3% in February, in part following the trend of the local economy. 

Inflation-Linked Bonds outperformed nominal bonds in the month of February as fears of inflation getting out of hand as the tensions in Ukraine and Russia escalate.

US Markets

US inflation rose solidly coming in at 7.5% in January, this the highest number since 1982, mainly driven by fuel prices and supply chain disruptions. The spike in energy prices related to the conflict will exacerbate inflationary pressures, and markets are still anticipating that the US Federal Reserve (Fed) will deliver five 0.25% rate hikes this year.

The US job market had a solid 2021, the strong job market continued into the New Year. US formal employment rose by 475 000 in January, leisure and hospitality posted the biggest gains, with an increase of 170,000. Trade, transportation and utilities contributed 98,000, while professional and business services rose by 72,000 full time jobs. 

Heading into February, concerns over the strength of the US consumer began to increase but both the flash February PMIs (manufacturing strength) and the January retail sales data provided some relief. The services PMI business survey rose sharply, as did the manufacturing PMI. Retail sales beat expectations, rising 3.8% after a disappointing December release, suggesting that US consumers had delayed spending as a result of Omicron rather than curtailed it.

The Nasdaq 100 Index fell into a bear market territory (20% off from all time high) for the first time since the pandemic as investors exit risk assets following Russia’s invasion of Ukraine in mid-February. While the US broader blue chip index the S&P 500 fell in correction territory (10% off from all time high). Information Technology and communication services led the decline with losses of 4.9% and 6.9% respectively. One of the most notable losers in February is Tech heavy weight Meta, the parent company of Facebook, the company missed on earnings and the market heavily   punished it, Meta lost more than 26% in a single day wiping 200 billion dollars of its market cap and 29 billion dollars of Mark Zuckerberg personal wealth.

US 10 year bond yield retreated from mid-month high of 2.05% and closed at 1.8% at the end of February, as investors switch to less risky assets amidst the Russia-Ukraine conflict.

European Markets  

European Union is caught between a rock and hard place the Russia-Ukraine conflict threatens its energy supply, the 27 member union imports about a quarter crude oil and 40% of natural gas imports from Moscow and further sanctions could be both detrimental for both Russia and Europe at large.

The seasonally adjusted unemployment rate stood at seven percent in December, the lowest level since the official Eurostat statistics agency began compiling data in April 1998. The Eurozone ended 2021 -- the year after the worst recession since World War II -- with its lowest ever unemployment rate. A testimony to the success of our collective response to this crisis," said Paolo Gentiloni, the EU economics affairs commissioner.

Business surveys such as the flash Eurozone composite Purchasing Managers' Index (PMI) indicated an acceleration in economic momentum in Europe. Eurozone headline inflation reached 5.1% year-on-year – its highest level on record. Despite this, more than 50% of the headline number is coming directly from energy inflation. At its February meeting, the ECB didn't take the potential for rate hikes this year off the table but did suggest that a calm and gradual approach would be taken.

European equity markets followed the global trend, the Euro 350 lost more than 3% in February, as geopolitical tensions rattled financial markets. 8 out of the 11 sectors and 12 out of the 16 countries represented in the benchmark declined over the month. The Consumer Discretionary sector and Germany, respectively, hosted the most significant declines among major segments.

Emerging Markets 

The Russian military invasion on Ukraine, has sent Emerging Markets equities nose diving. US President Joe Biden announced sanctions against four major Russian banks. Russian stocks plunged on the last week of February, with the MOEX Russia Index closing down more than 33%. Major Russian banks VTB Bank and Sberbank plunged 42% and 50% respectively on news of sanctions coming from Washington. The removal of Russian banks on the swift payment systems added to Moscow’s troubles.

The Central Bank of the Republic of Turkey (CBRT) kept its policy rate on hold at 14% and maintained dovish forward guidance despite surging inflation. After cutting rates by 500 basis points since September 2021, inflation reached a record 49% earlier this month.

In its first policy meeting with new Governor Victoria Rodríguez Ceja, the Bank of Mexico followed last month’s surprise 50-bp hike with another hike of equal magnitude. The move was in line with consensus forecasts and brought the policy rate to 6%. Earlier in the month, Mexico reported January inflation of 7.1%, down slightly from December’s 7.4% print, but above more than double the central bank’s 3% target

Chinese consumer price inflation slowed to 0.9% year over year in January, down from 1.5% in December and below consensus forecasts, as food and energy price increases moderated. Inflation remains subdued in China, providing an opportunity for policymakers to ease further monetary policy in an attempt to spur growth.

The broader emerging market index lost 3.4% in February, 14 out 25 countries posted gains in the month of February.   Russia (down 50.3%) posted its largest monthly decrease since August 1998, while Hungary (down 24.6%) and Poland (down 11.8%) also faced sizable declines. Peru was the star performer amongst its Emerging markets peers, with gains of 7% for the month and 20% for Year-to-date. 

Funds on the Outvest Platform

Despite the geopolitical events which rattled financial markets, the funds on the OUTvest platform were able to hold their ground. With exception to the Coreshares Total World Stock Exchange Traded Fund (ETF) which lost 2.9% of its value in February, all the funds on our platform posted marginal gains in the month. We will continue monitoring the events in Ukraine and Russia. Given our small weight into Russia, it is very unlikely we will make changes in our investment exposure in the short term.

As a long term investor, we should be reminded that –short term volatility is part of the game and diversification is the only free lunch. Time in the market beats timing the market.


For a more detailed look at the month please see downloadable PDF here.


OUTvest is an authorised FSP. All investments are exposed to risk, not guaranteed and dependent on the performance of the underlying assets. Past performance is not indicative of future performance. Individual investor performance may differ as a result of fees, the actual investment date, the date of reinvestment and dividend withholding tax. Both Exchange Traded Fund(s) (ETF) and unit trusts are collective investment schemes, however, these products are priced and traded differently. A unit trust is priced once a day whereas an ETF is trading continuously throughout the day during JSE trading hours. Benchmark: FTSE Global All Cap Index. Collective investment schemes are generally medium to long-term investments. Ts and Cs apply.


Read more at: economictimes.indiatimes.com


  • https://theconversation.com/can-wealthy-nations-stop-buying-russian-oil-178008#:~:text=Russia%20produces%20close%20to%2011,6%20million%20barrels%20per%20day.
  • https://www.fwi.co.uk/business/markets-and-trends/how-ukraine-war-will-impact-its-farming-agronomists-view
  • https://tradingeconomics.com/south-africa/inflation-cpi
  • https://www.worldometers.info/oil/oil-production-by-country/ 
  • https://www.kitco.com/news/2022-01-31/Top-10-largest-gold-producing-countries-in-2021-report.html
  • https://www.cnbc.com/2022/03/02/adp-february-2022-.html
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