At the arrest in May, the Fed actually raised the base year rates by a percentage point between 0.75 percent and one percent, and announced and sold the sale of government bonds and treasury bills. Uncertainty about the supply of energy from Russia to Europe is long. With such volatile financial markets, they have remained unsteady for a long time.

April was one of those months when there was no way to go and bond prices and at the same time stock prices fell completely against economic theories. This time, the argument for the fall in prices was not the conflict in Ukraine, but the main word was taken by the US Fed with its rising rates, comments the situation on the market of investment strategies Partners Group Martin Mat.

According to him, the fact that while the markets have learned to wolf Ukraine, the reason for the April fall in bond prices, but also action, are the steps of the world’s central banks, for the time being, with the sole exception of the European Central Bank.

All major central banks have either begun to tighten monetary policy or have taken a very strong approach to these steps. All inflation. It was 8.5% in the US, 7.8 percent in the Eurozn, reached 12.7 percent in the US and jumped to 14.2 percent in April. I know we will be well above 10 percent, Mat inflan data summarizes.

Stock market developments in April

As a result of general uncertainties and healthy entry, as well as operating finance for companies, stock funds have resumed their decline since April. The growth in income had a negative effect, especially on US stocks. The reason is the Fed’s policy, which, unlike the ECB, is active in meeting inflation. The increase in rates is combined with the withdrawal of income from circulation. Markets are struggling with the fact that the US economy has slowed down, which, moreover, surprisingly showed a 1.4% decline in the first quarter.

The US stock index S & P500 fell by more than eight percent. The main technological companies, which first belong to the rank of companies that have chosen cheap financing, are getting a big deal. The NASDAQ technology index, which has been a big driver of growth so far, the pig is correcting its gains and in April alone the dog lost 10 percent, said Mat.

This also had an impact on the average performance of the koruna globally diversified equity funds offered in the Czech Republic. According to the Partners Index, the mutual fund lost about 3.6 percent in April. In the first year alone, the value of the investor’s assets fell by an average of 8.4 percent. If we take the development in the last 12 months, they are still at 0.3% plus.

Otzka is how long. Even the special exchange of funds in April recorded a decrease of -4.4 percent. What was the bottom in the weight of risky sectoral and regional markets. This is despite the fact that European shares fell by an average of 3 percent in April.

Equity fund performance (fund group performance in%)
04/30/22 April from Mon. year 1 year 3 years 5 years 10 years Poet fund
PIF-AK -3.6 -8.4 0.3 24.2 32.5 117.7 38
PIF-SPEC -4.4 -17.9 -12.2 1.1 5.3 29.5 14

  • PIF-AK funds investing in the action of developed countries
  • PIF-SPEC funds investing in underdeveloped countries and gave special strategies (marginal markets, individual sectors, etc.)

Inflation and the steps of central banks crush bond prices

Bond prices also fell in April, Mat explains for the rest of the year on the part of central banks: With higher basic rates, investors demand a return, which they can achieve with existing bonds only by lowering their price.

The average price of quality bond funds fell by -1.1 percent in April. In the last twelve months, this is a 5% loss, which, according to Mat, is the first fall in bond prices, along with the fact that their yields increased.

The situation is driving me happy with the so-called risky bonds. According to the Partners Index, mutual fund hedge funds corrected by another -2.1 percent in April. Meziron are not like that by -5.7 percent.

Bond fund performance (fund group performance in%)
04/30/22 April from Mon. year 1 year 3 years 5 years 10 years Poet fund
PIF-LONG -1.1 -2.7 -5.0 -2.7 -4.3 6.3 19
PIF-HY -2.1 -6.3 -5.7 1.2 2.1 35.1 22

  • PIF-DEBT funds with strong and high-quality corporate bonds
  • PIF-HY funds with investments in risky and speculative bonds

In this context, Mat also comments on the steps of the NB. According to him, in its anti-inflation campaign, it must be very careful not to cut back enough economic growth for many years.

It began to fight the inflation as one of the first and most important measures to intervene to send the crown and thus reduce imports, which would reduce the number of general prices. We must realize that the Czech Republic is not only an export country, but also an import country. Imports reach about 80% of total Czech GDP and inflation is thus very sensitive to fluctuations in the koruna’s exchange rate, k.

Shift funds did not maintain their value

In April, the decline in mutual funds did not escape the fund, which invests in both bonds and equities. Therefore, their average value fell by 2.4% in the last month and the mezzanine is not -3.3 percent.

Smench fund performance (fund group performance in%)
04/30/22 April from Mon. year 1 year 3 years 5 years 10 years Poet fund
PIF-MIX -2.4 -6.2 -3.3 5.2 5.5 29.1 51

The exchange of funds was also negatively affected in April by a 9% correction in US equities and a 4% correction in European equities. In addition, the decline in bond prices related to inflation and the expected actions of central banks also had a negative effect.