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  • Belvedere Group

February 2022 Market Commentary

Updated: Oct 4, 2023

February brought more uncertainty, not just to the markets, but to the whole world. For those that are not watching, please see below graphs from Bloomberg showing the last 1-month movements for the world’s major indexes. Bleak reading with all major indexes in the red and all close to erasing the last year worth of gains. I recently spoke to a network of lawyers in Birmingham about the ‘State of play’ or state of the market, and I would like to share a couple of the points or concerns that have plagued the market over the last month, which I think has contributed to the market setting new lows to the likes we are seeing now.

  • Russia/ Ukraine - Over the past 10+ days, we have seen the situation with Russia and Ukraine worsen. With already over 1 million people having been displaced, countless sanctions being thrown at Russia, this is having a knock-on effect on the market. But when we look at the S&P for example and see that, the developed market exposure to Russia is approximately 0.5%, there isn’t much direct exposure. So, it seems that what investors are really reacting to, and taking a risk-off approach to the markets, is the indirect exposure to the Russia/ Ukraine war, which are 1. Higher oil and gas prices, 2. Continued supply chain problems in and around Europe, 3. Potential recession in Europe, just to name a few.

  • Inflation - Interestingly, I spoke to the concerns of prolonged inflation last month, but the biggest concern is the potential of inflation hitting double-digits. The BoE published their monetary policy report in February and talked about the concerns of inflation reaching 7% by Spring 2022 and then coming back down to 2% over the next 2 years, but this was based on oil and gas prices quickly coming down and prices of goods that were bought from abroad to also come back to nominal levels. If the Russia/ Ukraine war continues for a prolonged period, this will potentially keep oil and gas prices high as well as continue to disrupt supply chains which will keep goods brought from abroad high.

Potential Headwinds Interest rates - One of the tools available to the central banks around the world, that we all need to keep an eye on are rising interest rates due to rising inflation. Focusing on the Fed (Federal Reserve - US), we believe that 0.25% has already been priced into the markets, but if the Fed decides to raise interest rates much more aggressively, to say 0.5%, this will signal that they are much more worried about inflation and the effects of inflation on the everyday person than they led the market to believe which could lead to a market sell-off. We are expected to know the Fed’s decision in the coming weeks. Increased taxes - This shouldn’t come as a surprise to us all as we are all aware that the furlough that was handed out during Covid had to be paid back. Two tax rises coming in April are National Insurance (NI) increase, also known as the health and social care levy and the Dividend tax rise, both taxes are rising by 1.25%. Another change to the taxes is what is being named as the ‘Stealth Tax’ this is where taxes are not necessarily rising but rather allowances are freezing. The income tax bands, which typically rise every year have been frozen for 5 years, meaning that as earnings go up, more people will fall into the higher and additional rate tax bands thus paying higher taxes. Last Word The question I get asked is, should I still be investing now, or should I be holding onto my money for when the market picks back up. My response to this is simple, finance 101, the best time to invest is when the markets are down, but there needs to be a plan. At Belvedere, in times of turmoil and market distress, we focus on containment and limiting our client’s downside risk. If we can limit your downside exposure, when the markets pick back up, you will be starting from a higher market position. Lastly, it is important in times of rising inflation, that your money is keeping pace.


The commentary you find on this page is for information only; it is not intended as research or a recommendation suitable to your individual circumstance. Please seek financial advice from a professional before acting on investment decisions.

As is the very nature of investing, there are inherent risks, and the value of your investments will both rise and fall over time. Please do not assume that past performance will repeat itself and you must be comfortable in the knowledge that you may receive less than you originally invested.


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