Investment Update – March 2022

April 5 | 3 min

Overall, the Balanced growth investment option returned -2.17% during the March 2022 quarter in accumulation, and -2.18% in pension. 

After strong gains through much of 2021, global equity markets fell moderately during the March quarter. The main factors affecting investments markets were: the Russian invasion of Ukraine; the US Federal Reserve signalling that it needs to raise interest rates at a faster pace than previously communicated; and an outbreak of the extremely infectious Omicron variant of COVID-19 in several key Chinese provinces. Another important development during the quarter was the material underperformance of technology stocks, which were expensive prior to the recent correction.

While most global equity markets fell during the quarter, the Australian share market outperformed and rose moderately, as shown in Chart 1. This reflected factors such as strong increases in commodity prices (particularly iron ore) and the Reserve Bank of Australia communicating that it is reluctant to raise interest rates versus many other central banks.

Russian invasion of Ukraine

Russia invaded Ukraine on 24 February. Prior to the invasion, equity markets had fallen, mainly reflecting concerns about rising interest rates as well as the possibility that Russia might invade Ukraine. NATO allies have avoided direct military confrontation and have
instead opted for measures such as significant economic sanctions. These sanctions include preventing the Russian central bank from accessing some of its foreign reserves and banning selected banks from the Swift system. This has made it more difficult for the Russian government and its citizens to transact internationally. In response to these sanctions, Russia has demanded Europe to pay for its natural gas in Roubles.

Although Russia and Ukraine are relatively small economies, they contribute significantly to the energy, food and material markets. Prices of some commodities soared during the March quarter, as shown in Chart 2.

Rising interest rates

The Eurozone’s inflation rate is at an historic high, and inflation in the US is at a 40-year high. Despite the uncertainty of economic growth thanks to the Russian invasion of Ukraine, the US has raised its policy rate for the first time since 2018, by 0.25% . Bond yields have recently risen sharply in anticipation of more interest rate hikes. As a result, the Diversified bonds option did not perform well during the quarter.

The increase in yields also triggered a sell-off in technology stocks. The prices of these stocks were in many cases very elevated, and they are also more sensitive to interest rates than most stocks because a larger part of their value is linked to earnings beyond the medium term (reflecting strong expected earnings growth rates). The Innovation & disruption option suffered a material loss during the quarter. This loss followed extraordinarily strong performance over the prior two years.

China lockdown

China was one of the worst-performing major markets in the March quarter. Covid cases have increased in China, and the government has continued to enforce targeted lockdowns. Large cities such as Shanghai and tech-hub Shenzhen have been affected. This is likely to hinder China’s economic growth and further constrain global supply chains. Another factor that contributed to the Chinese stock sell-off was regulatory changes in some sectors.


For the first time in many decades, most of the developed world is experiencing inflation well above the levels targeted by central banks. This reflects a combination of very stimulatory policy and restricted supply chains as a result of Covid-19.

One of the key concerns for investment markets is the level of US inflation, which has reached its highest level in around 40 years. The US Federal Reserve has been relatively slow in recognising that the US has a material inflation problem and has only recently started to adjust policy. It is aiming to reduce inflation while engineering a “soft landing” in the economy. History shows that this has been difficult to achieve when inflation is high and the unemployment rate is very low, as is the case today. Bond markets are pricing a greater than average probability of the US experiencing a recession in the next two years. While we continue to monitor this risk closely, we also note that the US economy is currently growing at reasonable pace, reflecting factors such as low interest rates and high levels of savings.


Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns.

This information is general advice which does not take into account your personal financial objectives, situation or needs. Before making a decision about Vision Super, you should think about your financial requirements and consider the relevant Product Disclosure Statement and Target Market Determination. Issued by Vision Super Pty Ltd ABN 50 082 924 561 AFSL 225054 at

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