In the March issue, we look at market fragility and the ‘great rotation’ as bond yields rise. We also consider whether Asia could surprise investors in the Year of the Tiger.
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While the Ukraine crisis has undoubtedly destabilised markets, they were already fragile. Inflation has been the key driver for this uncertainty, with CPI in the US tipping over 7%. For the first time in 40 years, investors need to contend with central banks tackling a sharply rising cost of living by raising interest rates.
Food and fuel remain the key areas of rising prices. Labour shortages, rising processing costs and delivery concerns have pushed the UN Food and Agriculture Organisation’s price index up by nearly 50%. At the same time, energy prices have spiked in response to the Ukrainian crisis.
Having initially considered inflation to be transitory, central banks are now starting to act. All eyes are on the Federal Reserve, which may raise rates for the first time since 2018 in its March meeting. This change of mood has delivered higher bond yields and may prompt a significant rotation in markets in the year ahead.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
Please remember investment involves risk. The value of investments and the income from them can fall as well as rise and investors may not receive back the original amount invested. Past performance is not a guide to future performance.