How are Aussie stocks holding up in 2022?
Stockmarkets around the globe have gone through a rollercoaster ride in the opening weeks of 2022 but Australian equities appear to be holding up.
This year had already seen markets hit with some heavy falls as investors prepared for more interest rate hikes from central banks attempting to hold back inflation, while the tense situation in Ukraine also acted as a dampener for investor sentiment.
In this article, Money Management examined how the Australian market compared with others around the world over 2022 so far, as well as which parts of the stock market yielded the best returns – and posted the worst losses.
Performance of Australian stocks vs rest of world
Source: FE Analytics. Total return in Australian dollar between 1 Jan 2022 and 22 Feb 2022
As the chart above shows, Australian stocks fell across the opening weeks of 2022 but held up relatively well when compared with the rest of the world – the MSCI Australia index is down a little under 2% while the MSCI AC World ex Australia index (so the global stockmarket aside from domestic stocks) has dropped 6.40%.
Part of this is down to the make-up of the Australian market, where more than half of the index are from cyclical business in the financials and materials sectors – which are beneficiaries of the higher inflation and rising interest rate backdrop to the global economy.
The global market, on the other hand, has large weightings to growth stocks like tech, which would suffer from higher rates.
Performance of Australian stocks vs major regions
Source: FE Analytics. Total return in Australian dollar between 1 Jan 2022 and 22 Feb 2022
Taking a more granular look at the global stock market and its major players, the ASX 300 outperformed the US’ S&P 500 and Europe’s Euro STOXX by a decent margin, thanks to the relative strength of cyclical stocks.
However, the best performer was the UK’s FTSE 100. Although this market had been a laggard for some time, mainly down to the uncertainty caused by Brexit, its heavy weighting to areas such as banks, miners and oil stocks, as well as its cheapness compared with other markets, attracted investors in early 2022.
Performance of Australian stocks by market cap
Source: FE Analytics. Total return in Australian dollar between 1 Jan 2022 and 22 Feb 2022
The chart above shows how Australian stocks held up when broken down by their market capitalization. The general ‘risk-off’ sentiment of 2022 meant investors shied away from small- and micro-cap stocks, which tended to be more volatile, and looked towards
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