Good morning,

We certainly live in interesting times.

As I have written about previously inflation and the medicinal therapy to control the symptoms being increasing interest rates are dominating investment markets in 2022.

It’s impacting all asset classes being shares, property, debt (bonds) and of course cash itself.

The whole point of increasing interest rates is to reduce the supply of money and demand. Central banks around the world are increasing interest rates to reduce economic demand.

So basically they want to see increasing unemployment and falling consumer spending.

So far they haven’t seen enough of it either overseas or here and hence interest rates are still going up. On Monday in the US the unemployment rate came in at 3.5% which actually meant more people had a job.

Previously it was 3.7%.

But that’s not what the Federal Reserve in the United States wanted – they wanted more people unemployed.

More people unemployed means they don’t have to put up interest rates as much to control inflation.

The same story is being played out everywhere. So when you see newspaper headlines screaming ‘recession’ it’s really not that big a deal. In fact, a mild recession is what central banks are trying to achieve although they won’t say it.

Of course, no one wants a severe recession or depression.

But right now, good news is bad news.

It remains a volatile time for financial markets, and we are allocating across asset classes accordingly.

If you have any queries let me know.

Regards,

John