It was another very volatile quarter for financial markets as share and property markets took their lead from the interest rate market. Inflation remains highly elevated and concerns are building that the current inflation pulse could become long lasting, as pay rises adjust to reflect the high cost of living. This fear has prompted a near uniform response from central banks to tighten policy to slow demand, such that demand and supply come into better balance.

Whether this is the correct policy action remains to be seen because its hard to fix supply issues using interest rates. The fact is that central banks have chosen inflation over economic growth suggesting that the odds of recession (particularly in the US) increased over the period. As the quarter unfolded, it became clear that the path to a soft economic landing was looking increasingly narrow. For most asset classes, the combination of high inflation, rising rate expectations and increased recession risk has been an unpleasant cocktail and the extent and breadth of asset market declines has been historic.