Summary of Q1 2022 and Q4 2021 January 21, 2022

Summary of Q1 2022 and Q4 2021

Will Q1 give us stellar returns?

Q4 of 2021 saw a strong ending. So will Q1 2022 be another bullish quarter too? Here, we will recollect some important episodes from Q4 2021 and point out some events that are important in Q1 2022.

2021 Q4 2022 Q1
  • Omicron variant
  • Fed’s tapering
  • Inflation rate
  • March 2022 FOMC Meeting
  • US-China relations

Looking back at Q421

Q4 2021 was an eventful quarter with market moving events and economic data points that came in at record levels.

The market was supported by strong fundamentals and strong corporate earnings, though supply chain disruptions tamed the forward guidance of many companies. However, with the discovery of a more contagious COVID-19 variant, Omicron, and the Fed’s pivot to a more hawkish stance amid record inflation figures, saw the market retreat initially and trade at an elevated volatility level before the famed Santa Claus rally towards the end of the year.

The charts below show all three indices started the quarter on a bullish note and traded to record levels, but retraced during November. The selling pressure intensified after the discovery of the Omicron variant, and was made worse by the hawkish tone of the Fed. However, the market bottomed and started climbing at the start of the last trading month.

Dow Jones Index

Summary of Q1 2022 and Q4 2021Source: Bloomberg

S&P500 Index

Summary of Q1 2022 and Q4 2021Source: Bloomberg

Nasdaq Index

Summary of Q1 2022 and Q4 2021Source: Bloomberg

Below are some of the key market moving factors of Q4 2021:

Omicron variant of COVID-19

Nothing seemed to be able to stop the bullish sentiment of the market till the discovery of the new COVID-19 variant – Omicron. The Omicron curveball resulted in the three major indices dipping more than 2%, with the Dow Jones Industrial Average briefly falling more than 1,000 points a day after Thanksgiving.

The variant ,which was first discovered in South Africa, soon began to spread across the globe, and the World Health Organisation soon categorized it as a “variant of concern”, which is traditionally for variants that are thought to be more contagious and have a certain resistance against currently available vaccines.

In keeping with initial reports, the Omicron variant quickly became the dominant one in numerous countries with many experiencing a resurgence in COVID-19 cases. This was in addition to the current Delta variant. As a result, cases soon exceeded the numbers reported during the pandemic’s highest point. Investors feared that the new variant could cause another series of lockdowns, especially during the festive season, which would dampen economic activities.

The contagion fear caused a series of selloffs in the market in the days following the initial discovery of the variant.

However, the market rallied, tempered by signs of milder illness caused by Omicron1. Though it was still not clear if the new variant was more or less dangerous than previously perceived, the market rallied anyway, perhaps supported by strong market fundamentals.
The rally may set the tone for a strong start this year though risks of the Omicron variant are still to fully dissipate, and the rally could still be threatened by any negative developments in the pandemic.

Fed tapering

From the pandemic lows, the market rebounded back strongly and quickly thanks to the Fed’s generous injection of huge amounts of liquidity into the US economy. With the Fed’s support, it ended the shortest bear market in history and the policy tools for economic recovery were kept in place to ensure that the economy went back to pre-pandemic levels. Investors cheered the supportive monetary policy and the Fed’s dovish stance.

The Fed’s supportive stance however changed to a slightly hawkish tone when the Fed’s Chair Jerome Powell testified in front of Congress in November.

The “once-thought-to-be-ever-dovish” Powell retired the word ‘transitory’ and cautioned that perhaps it is time for the central bank to dial back on the quantitative easing.

The initial market expectation was for the tapering to be at USD$15 billion each month, which would end the bond-buying program in June 2022. However, as expected after the testimony by Powell in Congress, the Fed announced in its December meeting that it will begin tapering by aggressively dialing back its bond-buying by USD$30 billion each month; double of the initial expectation. As a result, net new purchases of bonds will end by March 2022, which is ahead of the previous schedule. This policy change was in response to the robust economic recovery. Though Powell reiterated previously that the end of the tapering will not necessarily bring forth rate hikes, December’s meeting signals at least three rate hikes in 20222. Though the rate hikes remain to be seen, it is clear that the direction of the central bank is pivoting towards a more normalized monetary policy.

Inflation rate

As the economy emerged from the pandemic, it was previously ascertained that the increase in price levels were caused by factors that were transitory in nature. However inflation rates reported consistently rose faster than expected; inflation rose 6.8% in November which was the fastest increase since 19823 Inflation may not seem to be that transitory and may be attributed to more structural factors.

Inflation is rising faster than expected and in turn, fuels an increase in inflation expectations which is self-fulfilling in rising inflation. Surveys conducted reflect that inflation is a key risk that investors are mindful of, and may be the reason for lower stock market returns4. See effects of inflation and how you can position your portfolio to counteract inflation.

With the long-term inflation target of 2%, the Fed is usually more tolerant of a runaway inflation rate. However the current episode of prices rising to record levels are believed to be more permanent in nature, which is forcing the Fed to step in and control the inflation rate.
Expecting contractionary monetary policy and higher inflation expectations, investor sentiment is turning negative due to lower liquidity for economic activities.

Entering into the first quarter of 2022, here are some events worth noting.

March 2022 FOMC Meeting

With the end of the Fed’s bond-buying program in March, the Fed will be able to combat inflation with interest rate hikes. This is because higher interest rates increase the cost of borrowing which is effective in stemming inflation.

FOMC Dot Plot

Summary of Q1 2022 and Q4 2021

Each dot on the dot plot represents a committee member’s views on the desired interest rate level. From the dot plot, we observe that the current interest rate level is far from the desired rate. Since there are projections of 3 interest rate hikes in 2022 from the December 2021 Fed meeting, there is a possibility of the Fed signalling a rate hike in March 2022. Hence, this meeting is deemed as one of the key meetings for market participants.

US-China relations

As the US and China are the two largest economies of the world, the relationship between them is very important. Worsening relations between them can affect world trade due to possible tariffs or even sanctions. With tariffs, the cost of imports increase which ultimately gets translated to higher prices that consumers have to pay. Thus, tariffs could worsen the currently high inflation levels.

The US “boycott” of the Beijing Winter Olympics5, started worsening the US’ already tense relations, and China vowed to get back at the US if it continued with the boycott . At the time of writing, China has yet to retaliate. Thus, the first quarter of 2022 is where we get to see the approach that China is taking with regard to the boycott.

2022 Q1 outlook

S&P500 monthly return

Summary of Q1 2022 and Q4 2021

To conclude, we look at the seasonality returns and we have found that through the last 10 years, January has one of the lowest probability of positive returns. Furthermore, the Dow Jones and S&P500 reached record highs in December 2021 due to strong earnings releases.

With January 2022 lacking earnings to support the market, investors should be wary. For the whole of 2022, investors should keep an eye out for possible black swan events and manage their positions.

Like what you have read? Join our Global Markets Investment Community on Telegram today to share your thoughts with us and other like-minded investors!

Open a POEMS account to start trading or chat with one of our licensed representatives to find out more.



These commentaries are intended for general circulation. It does not have regard to the specific investment objectives, financial situation and particular needs of any person who may receive this document. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of the units and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. Investors may wish to seek advice from a financial adviser before investing. In the event that investors choose not to seek advice from a financial adviser, they should consider whether the investment is suitable for them.

The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries.

Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.

About the author

Lee Yong Heng (Senior Dealer) & Chan Zi Quan (Dealer)

Yong Heng joined Phillip Securities in June 2020 as an Equity Dealer in the Global Markets Team. He specializes in the US and Canada markets assisting clients and supports the UK and Europe markets. Yong Heng graduated with First Class Honours from Singapore Institute of Management, University of London (SIM-GE) in 2015 with a bachelor’s degree in Economics & Finance. He also completed his CFA studies 2019.

Zi Quan is a US Equity Dealer in the Global Markets Team and specializes in the US and Canadian markets. He is an avid crypto fan and is adept in macro analysis.

Contact us to Open an Account

Need Assistance? Share your Details and we’ll get back to you


This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <> for more information in relation to the dividend distributions.  

The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

This advertisement has not been reviewed by the Monetary Authority of Singapore.  


Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
Tel: (65) 6230 8133 Fax: (65) 65383066