Monday Musings: March 14, 2022

Mar 14, 2022


Public Trust Credit Team

Investors fly to quality amid uncertainty in markets

As the conflict in Ukraine trudges on, the markets are proving unpredictable, sparking fear in investor sentiment. We have seen commodity prices spike in recent weeks, particularly oil, wheat, and corn. As investors continue to view the market with skepticism, investors are moving money to haven assets such as gold and government bonds. The Wall Street Journal Dollar Index, which measures the value of the U.S. dollar relative to a basket of sixteen foreign currencies, closed Friday at its highest level since June 2020. The U.S. dollar is treated as a haven asset due to its status as the world’s reserve currency. Investors are reallocating their investments within the equity markets, as well, moving money out of riskier sectors such as tech and into more dependable and reliable investments, particularly utilities. The utility companies within the S&P 500 are up 3.6% in March, while the index as a whole has seen a 3.9% decline over the same period. The staggering inflation figures coupled with the murky outlook of the Ukraine crisis has sparked fear in investors who are now deciding to take a more passive seat on the sideline as we wait impatiently for the looming situations to unfold. Many are claiming this to be a prime opportunity to buy the dip, but with possible stagflation or even an impending recession, it is too difficult to say whether this is truly a dip or the beginning of a larger negative trend. JP Morgan Chase strategists estimated that investors had increased their cash positions last week to the highest level since March 2020 to protect themselves from a possible recession and to have available liquidity to make immediate investments should the right opportunity present itself.

All comments and discussion presented are purely based on opinion and assumptions, not fact. These assumptions may or may not be correct based on foreseen and unforeseen events. The information presented should not be used in making any investment decisions. This material is not a recommendation to buy, sell, implement, or change any securities or investment strategy, function, or process. Any financial and/or investment decision should be made only after considerable research, consideration, and involvement with an experienced professional engaged for the specific purpose. Past performance is not an indication of future performance. Any financial and/or investment decision may incur losses.

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