March market update and investment risks

The following reflects the general views of our Treasury & Investment Office (T&IO) and should not be taken as a recommendation or advice as how any specific market is likely to perform.

These views are as at the end of March 2022.

The value of investments can go down as well as up. Investors could get back less than they put in.

Please remember that past performance is not a reliable indication of the future performance.


The relatively mild infection produced by the dominant Omicron COVID-19 variant meant that many economies were able to reduce restrictions and move towards fully reopening during the quarter, aiding global economic growth. However, in China, strict COVID-19 curbs and continued uncertainty in its property sector hampered economic activity in the country somewhat. The price rises seen on many goods and services globally over the past year continued during the period, a problem that was exacerbated by Russia's military invasion of Ukraine in late February. The conflict sent prices in energy markets (oil and gas) and other key commodity markets soaring as production shutdowns and international sanctions began to hit the Russian economy. Global economic activity began to be negatively affected, particularly in Europe where many nations rely on Russian gas supplies. The US Federal Reserve and the Bank of England both raised interest rates in response to the ongoing inflationary environment.

Equities (or shares)

The UK stockmarket, led by the FTSE 100 larger companies index, proved to be remarkably resilient in a difficult start to the year, ending just in positive territory for a sixth-successive quarter and ahead of the major regional equity markets in local currency terms. The dominant events were the crisis in Ukraine and swingeing sanctions on Russia. Risk appetite improved as the two sides met for peace talks.

US stockmarkets fell, with falls led by the technology-dominated Nasdaq, although losses were reduced by strong rallies late in March.

The war in Ukraine and its consequences weighed heavily on European equities. They fell and lagged other major markets and regions. Concerns about inflation, which was driven in part by surging commodities prices after Russia invaded Ukraine, and rising interest rates dampened investor sentiment.

The Japanese stockmarket fell and lagged the MSCI World Index. Asia Pacific ex Japan performed broadly in line with other markets around the world, although once again its largest constituent market, China, performed poorly.

What do you mean by Equities?

  • Equities are commonly known as "shares". When a fund buys a company share, it is investing in a company and, in exchange, receives a share of the ownership of that company. Shares give two potential investment benefits:

    • share prices may increase as the value of the company increases.

    • companies may pay dividends - regular payments made to shareholders based on how well the company is doing.

What are the general risks of this type of asset? 

  • Over the longer-term (over 10 years), equities are considered to offer greater growth potential than many other asset types. However, the value of any investment can go down as well as up and so there is a higher risk of losing your original capital than investing in fixed interest securities (see below).
  • The financial results of other companies and general stock market and economic conditions can all affect a company's share price, and consequently the value of any fund investing in that company.

Fixed interest

It was a volatile period for fixed income markets, initially driven by concern that interest rates would need to be increased more aggressively to tackle surging inflation. The invasion of Ukraine became the dominant theme with a surge in wheat and energy prices expected to put even further pressure on inflation. Against this backdrop, UK government bonds (gilts) delivered negative returns as the 10-year gilt yield climbed above 1.7%, reaching its highest level in since 2016. UK corporate bonds were also in negative territory with the downturn in risk appetite leading to weakness across credit markets.

Global fixed income markets underperformed across the board as investors worried about inflation and increasingly hawkish central bank rhetoric before events in Eastern Europe cooled the lure for risk assets almost completely.

What do you mean by Fixed Interest?

  • Fixed interest securities, more commonly known as "bonds", are loans issued by companies or by governments in order to raise money.

  • Bonds issued by companies are called Corporate Bonds, those issued by the UK government are often called Gilts or UK Government bonds and those issued by the US government are called Treasury Bonds.

  • In effect, all bonds are IOUs that promise to pay you a sum on a specified date and pay a fixed rate of interest along the way.

  • Index-linked securities are similar but the interest payments and redemption value are normally increased by a price index e.g. for UK government index-linked securities, interest payments and redemption value are increased in line with the UK Retail Price Index.

What are the general risks of this type of asset

  • On the whole, investing in Government or Corporate Bonds is seen as lower-risk than investing in equities. To date, no UK government has ever failed to pay back money owed to investors. But with Corporate Bonds there is a risk that the company may not be able to repay its loan or that it may default on its interest payments.

  • Corporate and Government bonds are sensitive to interest rate trends. An increase in interest rates is likely to reduce their value, and hence the value of any fund investing in them.


UK commercial property enjoyed a solid start to 2022, with total returns from all sectors providing a positive contribution. Despite the high level of COVID-19 cases, rising inflation and increasing interest rates, investors appear optimistic. We believe the reasons for the optimism are improving economic and employment growth  - both key drivers of the demand for space  - buoyant household savings, which are supportive of a retail and leisure recovery, and employees returning to the office. Trends of the past few months remain in play, with ongoing strong demand for industrials. Retail has seen a marked recovery, primarily driven by retail warehouses. Demand for office space is also steadily gaining traction, with undersupply at the prime end allowing vacancy rates to stabilise.

What do you mean by Property?

  • For our funds we would mean commercial property investment. This generally means the fund is sharing in the returns from the ownership of some buildings (for example, offices and shopping centres).

  • The value of the property may increase and tenants may pay rent to the owners of the building.

What are the general risks of this type of asset

  • Property can be difficult to buy and sell quickly. Fund managers may have to delay withdrawal of money by customers from a property fund until they can sell some of the buildings the fund invests in.

  • The actual value of a property is what someone is prepared to pay for it - an actual sale value. As sales are infrequent, interim valuations are based on a valuer's opinion and may be revised up or down from time to time. This can affect the value of a fund invested in commercial property, with the value possibly fluctuating significantly and could result in an investor not getting back the amount they originally invested.

  • This leads to a number of risks for funds investing in property:

    • Cash could remain uninvested as property assets can be difficult to buy, leading to lower returns than expected.
    • The value of the fund may be reduced if a large number of withdrawals are requested and it is necessary for properties to be sold at reduced prices.

    • There may be delays removing your money from the fund if property cannot be sold.

    • Property fund valuations may be revised periodically, upwards or downwards.

    • Rental income is not guaranteed. Defaulted rent and unoccupied properties could reduce returns.

    • If the size of the fund falls significantly, the fund may have to hold fewer properties, and this reduced diversification may lead to an increase in risk.

Need help? Have questions?

If you're looking for further information or want to chat about your product options, we can help.

Contact us