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Issued by 1OAK Capital Limited, authorised and regulated by the Financial Conduct Authority.  1OAK Capital Ltd (1OAK) (Registered in England & Wales Number: 06890293; FCA registration number 501453) provides fund management services for its customers. 1OAK Capital Limited is authorised and regulated by the Financial Conduct Authority. Registered Office of 50 Sloane Avenue London SW3 3DD.

April Market Updates

In April, markets saw little respite from the challenging conditions we endured in the first quarter of 2022. Markets continued to fall because of rising inflation, increased monetary tightening, a growing energy crisis, Covid and the ongoing Ukraine conflict.

The U.S

April was another difficult month for the U.S economy, as several disappointing earnings reports, unfavourable economic data, and increased monetary tightening caused major indexes to suffer. The S&P 500 Fell by 8.7% over the month, falling further into correction territory, whilst the NASDAQ and Russell 1000 moved into bear markets. The NASDAQ is experiencing its worst-performing month since 2008, plummeting by 13.3%.

Corporate earnings delivered a mixed bag, with Apple reporting a record first quarter for earnings whilst Netflix and Amazon were disappointing; their share prices plummeted, falling 35% and 14%, respectively. Netflix attributed the $55bn fall in value to the loss of 200,000 subscribers globally from January to April. The problems included rising inflation, supply-chain issues, and rising shipping and labour costs for Amazon.

This month, the Fed continued to be in the spotlight as it moves more aggressively to reduce rampant inflation by raising rates faster than had previously been expected. Various signs suggested that investors would finally see the FED action policies set out in the first quarter as inflation levels hit 8.5%, the highest level since 1981. We heard from multiple FED speakers who called for neutral interest rates throughout the month—arguing that rates should be at a level that does not encourage or hinder economic growth. The market's primitive strategy designed to react to any signals suggesting rising rates has resulted in the market pricing in a potential 50bps hike, a proposal that Fed Chairman Jeremey Powell did not reject.  


Source: Bloomberg from 31st October 2021 to 30th March 2022


This month, there was little evidence to suggest that the war in Ukraine was drawing closer to a resolution as fighting continued for the second month. Sanctions continue to be placed on Russia as the European Union put together their sixth package of sanctions, hoping to target Russia's oil revenue by enforcing an oil embargo. 

Europe's economy grew by 0.2% as growth was impacted by the ongoing conflict in Ukraine, with consumer confidence falling to levels comparable to a recession. The EuroStoxx 50 fell by -2.0% in April, and the Euro continued to lose value against the dollar, closing the month at €1.05 per 1.00$, the lowest level its seen since 2005. However, it is not all bad news in Europe this month, as business activity rose by 0.9% in April, as economic activity rebounded after the pandemic.

Emmanuel Macron was re-elected for five years for the French presidency with a 58.5% win over opposition Marine le Pen at the end of the month. Investors now await the parliamentary elections in June, which will decide who controls the majority of the 577 seats at the National Assembly.

The U.K.

As inflation heads towards 8% this month, U.K. households face steep rises in the cost of living. Both house prices and energy costs increased by record levels this month. Families face a 54% rise in annual energy bills, increasing the average bill by £788 a year, making it one of the most significant contributors to inflation in the U.K. House prices have also risen by 12.1% Year to Year in April. However, the market expects house price inflation to slow in the coming months or even reverse as further rate hikes are announced. Despite record inflation levels, the FTSE 100 advanced 0.7% in April. The UK market's relatively strong performance was partly because the pound weakened against the dollar, falling 0.2%, reaching its lowest level since 2020. The FTSE also benefited from a relatively high weighting in commodity and energy – sectors that have performed strongly.


Source: Consumer price inflation, UK - Office for National Statistics March 2012 to March 2022.


In April, the Bank of Japan (BoJ) increased its consumer price index outlook to an average of 1.9%, 0.9% above what was predicted early this year. This is a direct result of skyrocketing energy and commodity prices, a by-product of Covid and the ongoing conflict in Ukraine. The BoJ has since revisited its growth predictions for 2022, reducing it by 0.9%. Despite the increase in the CPI, the BoJ remains dovish in its monetary response, as economic data has shown improvement in many areas, such as production machinery and transport equipment, and unemployment levels also fell in April.

Emerging Markets

 The emerging markets index returned -5.6% in April; however, it began to flatten by the end of the month. The re-emergence of COVID has considerably impacted the index performance as China's Zero policy against COVID continues in Beijing and Hangzhou. China's markets suffered in April as investors became increasingly worried as there was little evidence that would suggest lockdown measures would ease in the coming weeks. This has caused investors to question whether China's 5.5% growth predictions for 2022 are feasible, something investors will watch over the coming months.

Fixed Income

The performance of fixed income assets over the first four months of 2022 has been the worst on record. Asset prices have fallen significantly as rates have increased. Fixed income has provided no diversification benefit for equities, with the value of both assets falling simultaneously.

The most significant losses in the fund have come from long-dated US Treasuries. These have historically acted as helpful diversifiers, but 2022 has been a drag on returns. Despite increasing inflation, the value of both US and UK inflation-linked bonds has dropped. For these assets, rising nominal rates have overpowered the increase in inflation. In the short term, real (inflation-adjusted) interest rates drive returns, and these have been rising from all-time lows.

Foreign Exchange

For internationally diversified multi-asset funds like the 1OAK MA80 fund, the level of exchange rates will have a material impact on the fund's value. Gains or losses on assets denominated in currencies other than the base currency of each share class can be exaggerated or reduced by the change in the FX rate when converted into the base currency. We have chosen to hedge all the foreign exchange exposure in each share class, which means that the performance of each share class in the base currency is similar.

The value of the USD has increased against most currencies through 2022, and the value of GBP has dropped. This has been a benefit for investors in the USD class as they have been hedged against the depreciation of non-USD assets. For GBP investors, the fall in the value of GBP against USD means that they have suffered the full effect of the fall in the value of USD assets, particularly the S&P 500. Funds that don’t hedge the FX risk have done better because the appreciation of the USD has offset some of the losses in the value of US assets. However, GBP is now back to recent lows. Investors in the GBP share class will not suffer if the value of GBP increases.

April Market Commentary