If we were to use one word to describe the beginning of the year in the equities market, it would be ‘turbulent’. The tech heavy market index, the Nasdaq Composite, recorded its worst January performance since 2008 amid the global financial crisis, with returns down c.9% in USD terms and down 12% in rand terms for the month. The increased concern of interest rates raising affected the market negatively as volatility increased. The CBOE Volatility Index (aka The VIX) which measures the stock market’s expectation of volatility, spiked up to 32 which is an increase of c.86% from the beginning of the year; however, it retreated down to 24.8 by the end of the month. Technology companies were hit the most by the uncertainty in the market as investors moved away from growth stocks which generally have high valuations and moved to stocks with lower valuations i.e., value stocks. As we result, value outperformed growth but both indices closed lower. MSCI World Growth Index for the month was down 9.3% while MSCI World Value was down 1.2%. While MSCI World Index overall was down 5.3% for the month of January.

Chairman’s Powell’s commentary at the Federal Open Market Committee (FOMC) meeting which happened on 26 Jan. were perceived as hawkish by the market; with some economists forecasting as much as seven rate hikes this year. Powell did not rule out the potential for a 50bps rate hike. The next FOMC meeting is in March, so the market will closely be waiting and watching as there’s a lot of uncertainty in the market. The bond purchase program will be held at $30bn per month and this is expected to be completed by as early as March, meaning that rate hikes can start.

The energy sector was the best performer in January as it was boosted by the price increase in crude oil prices. This was due to Saudi Arabia announcing unexpectedly to the market that they would cut oil production. In the fund, the best performers were Lloyds Banking group (+5.8%), Nintendo (+4.7%) and Cincinnati Financial (+3.4%). As can be seen, value stocks performed well in the fund due to the reasons discussed above. While Nintendo’s share price benefitted from the acquisition of Activision Blizzard by Microsoft because of the market expecting potential mergers and acquisitions for Japanese companies as the rationale was these companies would need to defend their positions from the takeover. Worst performers for the month were generally impacted by the overall market movements, these were Straumann Group (-23.4%), Amplifon (-22%) and Intuitive Surgical (-21%). Intuitive Surgical issued their Q4 results last month and despite performing well, the market sold off its shares because management warned that their Q1 FY’22 da Vinci procedure volume would be "significantly adversely affected" by the pandemic as hospitals will divert resources to deal with Covid-19 patients. This means that there will be less elective procedures which would have to utilities their surgical robots. For Q4, revenue growth was 17% to $1.6bn, gross profit margin was 68%