Q1: Covid restrictions are effectively abandoned by many Western governments including Ireland and the UK, with hospitality, travel & leisure all benefitting from pent-up demand. Financial markets however struggle to cope with building inflationary pressures and the drumbeat of war in Eastern Europe grows ever louder. In late February the West wakes up to the news it had been dreading as Putin’s tanks roll into Ukraine. Food and energy prices spike as it soon becomes clear this will be a protracted war with significant bloodshed and suffering on the ground and the disruption of trade and energy supplies from both Russia and Ukraine. Defence and energy stocks are favoured by investors, whilst the Russian stockmarket collapses under the weight of sanctions. Having begun 2022 yielding around 1.5%, the US 10-year Treasury yield has reached almost 2.5% by the end of March.

Q2: Giant US retailers, Walmart and Home Depot issue savage profit warnings, blaming stocking issues, prompting double-digit share price corrections. Financial conditions tighten further with the 10-year US Treasury ending the quarter around 3%, reflecting two interest rate rises from the Federal Reserve, including a 75bps increase in June, as inflation hits a 40-year high. The Bank of England continues tightening monetary policy with a series of 25bps increases, whilst the ECB remains reluctant to follow suit and leaves rates unchanged. Equity markets continue to decline against a rising interest rate environment, with high-growth sectors, notably technology, most impacted, a reversal of their multi-year outperformance since the 2008 financial crisis. Ukrainian resistance proves effective in halting Russian advances as Western sanctions are actioned in tandem with military assistance.

Q3: The US $ continues its upward momentum, reaching multi-decade highs against other major currencies and breaching parity with the euro in August. European gas price rises accelerate as supply disruption with Russia intensifies. The ECB finally begin tightening monetary policy with a 50bps rate increase in July, followed by a 75bps increase in September. Equity markets attempt to rally in first half of Q3 on hopes inflation may be peaking in the US and some well-received corporate results, but this proves transitory and major stockmarkets end the quarter lower than they began it. Political turmoil in the UK negatively impacts the pound and UK gilt markets in dramatic fashion as markets recoil from the ill-starred “mini-budget” on 23^rd September, where the new UK government attempts to slash taxes against a backdrop of deteriorating public finances.

Q4: Markets take encouragement from growing signs that inflation may have peaked. Commodity prices including oil, gas and foodstuffs have all fallen sharply from highs earlier in the year, despite fierce fighting in Ukraine continuing, with the Ukrainians regaining some territory. The housing market in the US has been showing consistent signs of a slowdown for several months and US 10-year bond yields are below 4%, well off their 52-week highs. Political drama in the UK culminated in the resignation of Liz Truss and the appointment of Rishi Sunak as the third holder of the post this year. This has brought some stability to the pound and UK Gilts. Lay-offs in the technology sector have been accelerating, including in Dublin, long a major centre of inward investment for US tech giants. COP 27 came and went with little concrete agreement on measures to address climate change. In China, the zero-covid policy of lockdowns is attracting public protests. We await 2023.