ECONOMIC AND MARKET OVERVIEW
Global news in the first quarter of 2022 was overshadowed by the events in Ukraine, which caused major moves in financial markets around the world.
Commodity prices exhibited extreme volatility which spilled over into equity and bond markets. Looming large over this macro shock overload was the US Federal Reserve, seemingly late to the anti-inflation party but, as they say,“better late than never”. According to Laurium Capital, the Federal Open Market Committee (FOMC) decision in favour of only an initial 25 basis point US rate hike at the March meeting seemed palatable for nervous investors, but the announcement was followed by a raft of hawkish Fed comments and forecasts for the future path of US interest rates. With surging energy and food prices further exacerbating the post Covid supply chain shocks of 2021, goods inflation has indeed reached significant, multi decade peak levels, and forced even the most sanguine of investors to reflect on the likelihood of more sustained second round inflation in the year to come. As a result, bonds sold off, reflected in the US 10 year yield rising to over 2.55% late in March, before retreating somewhat to 2.34% at month end. The German 10 year equivalent yield moved up by more than 80 bps in the month.
