From sovereign bonds to crypto to tech stocks, the quarter that just ended was a rough one for investors.
In fact, it was the worst quarter for stocks and fixed-income assets since Q1 2020, the infamous COVID lockdown quarter, according to Deutsche Bank. This time, though, it wasn’t just COVID, but a rogues’ gallery of miscreants pushing down risk assets in the period.
“Q1 was a dramatic time in financial markets, featuring Russia’s invasion of Ukraine, accelerating inflation, the start of another hiking cycle from the Federal Reserve, as well as an inversion of the 2s10s yield curve. That turbulence meant that the majority of assets in our sample have lost ground over the quarter, with just nine of the 38 non-currency assets in positive territory,” writes Jim Reid and Henry Allen of Deutsche Bank’s thematic research team, in an investor roundup note on Friday.
The so-called winning nine included commodities and the almighty dollar. Brent crude soared 38% in the quarter, pushing up inflation everywhere and putting pressure on the world’s biggest central banks to begin raising interest rates. The dollar was up 2.8%, meanwhile, its third straight quarter of gains. A strong dollar typically hits the bottom line of U.S. multinationals hard.
As the chart shows, tech bulls got clobbered last quarter. The Nasdaq fell 8.9% as the Federal Reserve began raising interest rates to put the brakes on inflation. It could have been worse. The tech-heavy index actually climbed 3.5% in March. The worst of the bunch? Russia's principal exchange, the MOEX. It fell 28.2% even though it was shut down for most of March.
The booby prize goes to the S&P 500, which turned in the best—or "least worst"—performance for U.S. assets, with a total return of -4.6%.
Not pictured in the chart is the rotten performance of sovereign bonds. Ten-year U.S. Treasuries notes fell 5.5% in the quarter, "their worst quarterly performance since it begins in 1999," Reid and Allen write. German bunds, meanwhile, fell 5.1%. The rout in bonds shows investors are growing increasingly wary about economic growth in the years ahead.
Also not pictured in the chart is Bitcoin. The king of crypto opened 2022 trading at $47,300. This morning it was trading at $45,100, a year-to-date decline of 2.7%.
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