OCM Commentaries

Market Commentary 20th January 2022

By January 20, 2022 January 21st, 2022 No Comments

Keep Calm and Carry On


While we’ve seen a volatile start to markets in 2022, what we’re seeing is not abnormal given current inflation expectations and tightening monetary policy. As a result, we have the same level of conviction to remain invested in markets in 2022 as we did to take risk off the table in 2020 at the start of the pandemic, and therefore our outlook for portfolio performance over the year remains positive. While we dislike seeing any downward movement in the portfolios, we do not try to time market movements, and will not be making any changes to the portfolios at this stage. We remain confident in our current allocation and encourage our clients to take a long-term view, looking past this short-term bout of volatility.


As investors, while it can be worrying to see downward movements YTD which has caused the 1 month and 3 month performance to now be negative, it is key to note that sell-offs are normal market behaviour following a period of strong performance, and are often needed for investors to reset market expectations moving through the cycle, the key is to understand why and decide whether it is permanent or just volatility and if volatility, what is the reason. Our view is that this negative movement is just volatility and that the declines in asset values are due to the market being irrational and not aligned with any change in the fundamentals.


In fact, if we focus on the fundamentals, the economic data is strong and growth has continued to be sustained globally with high levels of employment, alongside strong earnings which is excellent. The paradox though is that this positivity has driven the negativity in asset values because that positivity has in the short term (YTD) created a fear that interest rates will rise faster than anticipated and that the central banks could raise them too quickly and cause the economic cycle to end prematurely. Looking at this fear driven decline in assets, we as yet have no evidence to support this fear, as such the market movements are irrational and should be ignored. In fact, as we write the markets are green, asset prices have stabilised and government bond yields (which have risen exponentially in recent weeks) have declined, reflecting a calming of the nerves.


As an interesting analogy for you which I have used before, always think of the stock markets and their movements like the actions of dog when taking it for a walk. If you look back at the walk, we know where we started and we know where we ended, but during the walk the dog ran everywhere sometimes irrationally and sometimes not. Managing portfolios and looking after assets is sometimes like this in that for most of the time, the dog (being the assets) does what we expect, but sometimes the dog just does what it wants, but if we have control, it will come back and if it becomes too erratic, we can call it too heel. We do though in reality never have control which is why we always watch the dog and if required, act. As I write we have no reason to take any action as the dog is behaving normally and as expected, accepting we do not like it, and we are watching it, but the dog as a whole is doing what overall we expect it to do and because it is a dog you can never control it, totally. Hope you understand my analogy!!


Model Portfolios


Turning to the performance of the indices and model portfolios over the week, global equity markets have experienced headwinds, with the largest decline coming from US and Asian markets and growth heavy assets. The first earnings season of 2022 in the US began with financial institutions, and whilst results were somewhat mixed due to wage inflation and concerns over future growth, negative sentiment ultimately led to further downward pressure on US equity markets this week. They are today rising so that is good news.


However, following the declines in global equity markets, the portfolios with lower equity weightings, have experienced a challenging week due to their equity allocation through our multi asset exposure, when compared to the exposure in the higher risk portfolio which is more directional. The higher risk portfolios have more directionally allocated to the UK and Europe. While Global Equity and Managed portfolios have experienced greater pain in the short term, this exposure along with all others, is expected to recover as investor concerns settle over the weeks ahead. All of the positions when looked at historically, have had a strong rebound after a period of short-term volatility, as seen over 2021. UK large-cap equities performed stronger than other economic areas this week, due to a robust labour market, strong GDP data and signs that the Omicron COVID surge is abating. Although elements of political uncertainty remain a key risk in the UK, the OBI portfolios benefitted from an overweight position to UK equities, which has offset some of the downward price pressure caused by declining risk assets this week.



Past performance cannot be used as a guide to future performance and the value of your investment will fall as well as rise in value.  You may not get back all of your investment and the final value of your investment will depend on the performance of your portfolio.  The actual performance of an individual client’s portfolio may differ due to different funds being used and being restricted in relation to certain asset allocations.  Performance figures quoted include fund manager charges but exclude adviser, discretionary, custodian and switch charges.  Unless stated, income is reinvested into the portfolio.  The information contained in in this document is for information purposes only.  It does not constitute advice or a recommendation or an offer or solicitation for investment. OCM Wealth Management Limited is authorised and regulated by the Financial Conduct Authority (FCA Registration No: 418826) OCM Asset Management is a trading name of OCM Wealth Management Limited.


Key Events We Are Watching Over the Coming Weeks:


  • Monday 24th: US Markit Manufacturing PMI Data
  • Wednesday 26th: US Interest Rate Decision


This Day in History


On this day in 1892, The first official basketball game was played in Springfield, Massachusetts, by YMCA students of the game’s inventor, James A. Naismith.


Thank you for reading, have a great week!


Jason, Gina & Pete