International and Global Markets Commentary & Investment Outlook


Global equity markets whipsawed in the fourth quarter but ultimately logged gains. The U.S. market was up significantly, developed markets were up modestly, and emerging markets were down modestly.

The Federal Reserve started and then accelerated the normalization of its monetary policies, while the spread of the Omicron variant threatened to undermine the economic recovery. That back and forth, between conflicting forces, was the fuel for the dramatic gains and losses in stocks. Additionally, the regulatory environment surrounding Chinese companies remained cloudy.

In this past year, which was exceptionally volatile, all of Chautauqua’s portfolios appreciated in value. The International portfolios outperformed their benchmark and the Global portfolios performed in line with their benchmark. The challenges included vaccine rollouts, economic recovery, resurgent coronavirus waves, supply chain disruptions, elevated inflation, changes in monetary policies, and regulatory uncertainties. We made continuous adjustments to emphasize holdings, including initiating several new positions, that we believe are valued more attractively or are better suited to transmit pricing power. We also actively trimmed the weightings of Chinese holdings in order to contain the specific risks from regulatory uncertainties. Thank you for entrusting us to invest your precious capital and to navigate this challenging environment.

Market Update

In the U.S., economic growth has continued well-above potential, and the labor market has continued to recover much closer to full employment. Additionally, inflation has broadened out, increasing the threat of it becoming entrenched. In order to tame inflation, the Federal Reserve (Fed) will accelerate the taper of its bond purchase program, with plans to remove the pandemic stimulus by March. The Fed also expects to raise interest rates soon thereafter, for a total of three times next year. While these are notable shifts from the forecasts the Fed communicated just one quarter ago, the response is sensible.