Weekly Commentary: 17 January 2022 – 23 January 2022
Mostly negative returns from all major indices last week. Value stocks as loosely represented by the DJIA (-0.88%) fared worst while the S&P 500 (-0.29%) and the NASDAQ Composite (-0.28%) trailing behind. Mostly negative returns from the S&P 500 sectors with the exception of the top four sectors – Energy (+5.54%), Industrial (+0.55%), Communication Services (+0.50%), and Consumer Staples (+0.31%). In comparison, Real Estate (-1.38%), Healthcare (-1.24%), and Consumer Discretionary (-0.88%) formed the bottom three sectors. The STI (+2.39%) lagged behind Hang Seng (+3.79%) last week.
The Consumer Price Index published monthly by the U.S. Bureau of Labor Statistics (BLS) indicated that the inflation rate by the end of December has increased by 0.2% to reach 7%, the highest since 1982 and will likely to remain in the high range in the near term due to the global energy crunch and supply chain disruptions. The average US inflation rate for 2021 was 4.7%, the highest since 1990. The yield-curve flattened last week as both the U.S. 2-year and 10-year Treasury yield increased by 11 bp and 2 bp to reach 0.97% and 1.78% respectively. The 10Y-2Y US Treasury yield spread narrowed to 0.82%. Stock market sentiment was cautious as the global HY-IG spread contracted by 7 bp to 1.99% while the CBOE Volatility Index (VIX) increased by 43 bp to 19.19%. Both are hovering close to their 50-day exponential moving average of 2.01% and 19.19%.
As can be seen below, the global REIT markets mostly slipped with the exception of Hong Kong, France and Germany. However, the overall 12-month yield spreads remained positive and still favorable towards REIT’s forward total return. The iEdge S-REIT Index (+0.18%) and all the S-REIT sectors reported mostly positive returns. The two sectors that performed the best were Hospitality (+1.22%) and Retail (+0.38%). The sectors that fared the worst in the other hand, were Healthcare (-1.26%) and Industrial (+0.01%).
Back at home, we saw an uptrend in infections as the 7-day moving average of total COVID-19 cases rose to 974 from 544 the previous week. Omicron had brought in a new wave of the pandemic and saw many countries tightening their restrictions to curb the spread. So far, more than 50 countries have stepped up border controls to slow the spread and Singapore had also stopped all new vaccinated travel lanes (VTLs) destinations until 20th January. The VTLs launch with Qatar, Saudi Arabia and the United Arab Emirates are currently deferred until further notice. Virus development will need to be closely observed in order to identify the right time for a recovery play as the Omicron will likely delay the pace moving forward.
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