Global equities were almost unchanged in euro terms in the fourth quarter (+0.3%), ending the year on a poor note with a -7.5% drop in December. The rally in the euro over Q4 (+9.2% against the US dollar) disguised much stronger returns: the fourth quarter saw US equities 6.6% higher in local currency terms, Chinese equities 12.7% higher, whilst European equities were 10.0% higher. US bond yields remained volatile, ongoing hawkish rhetoric from the Federal Reserve offsetting better inflation data, whilst European bond yields moved sharply higher as the ECB turned significantly more hawkish. Over the course of the quarter, the general theme was one of growing evidence that inflation has peaked, central banks are slowing their pace of rapid tightening whilst arguing that rates should end up being higher for longer to control inflation, and growing fear of recession. Inflation, and fear that it would become entrenched, has been the root cause of aggressive central bank action this year, pushing financial asset prices significantly lower over the year (global equities fell by -13%, European bonds by 24%, US bonds by 20%). But the evidence is clear: inflation is falling, fast. Used car prices in the US, according to the Manheim Index (which leads CPI car prices by a couple of months) are now down 14% year over year. One of the largest housebuilders in the US said simply: “building costs are coming down”. The Adobe Digital Price Index showed that online prices fell 1.9% in November, the largest drop in 2.5 years. The structural pre-COVID-19 deflationary forces in a digital world have re-established themselves. This survey is the most comprehensive survey on digital pricing in the world and was created by Austan Goolsbee, the new president of the Chicago Fed, and a voting member of next year’s FOMC. Gasoline prices in the US have fallen so much from their peak levels they are flat on the year 36% off their highs. The impact this has on inflation, consumer spending and corporate margins into 2023 cannot be understated