Whatever happened to the old saying “don’t fight the Fed”? Typically, when the Fed and other central banks raise interest rates to cool inflation, an associated and necessary result is economic activity and corporate earnings slow, so equity markets sell off in response. But year-to-date the global benchmark All Country World Index (ACWI) has returned almost 10% and has largely ignored the fact that we are still in the midst of the most aggressive monetary tightening cycle since the 1980s. Starting in the first quarter of 2022, the central banks of the G10 largest economies have increased policy rates by a whopping 24% in aggregate. Meanwhile, central banks are also withdrawing stimulus through their quantitative tightening programs. But all the while stock markets have spent 2023 so far merrily (or recklessly?) marching higher.

We don’t think we are alone in saying that we will be happy to have 2022 in the rear-view mirror. This was a year filled with pervasive and relentless unrest, conflict, and sorrow. In 2022, Orwellian propaganda, doublespeak, and outright disinformation policies continued to spread around the globe. When the Merriam-Webster dictionary selects “gaslighting” as the word of the year – you know it was an unpleasant year.

In a previous inflation missive, I commented on powdered milk and toothpaste. The former being an example of a sacrifice families made in the past in response to soaring prices and the latter an analogy. Like trying to put toothpaste back into a tube that’s been squeezed, inflation is difficult to rein in once it takes hold. This sentiment rings true today, with the global economy experiencing severe inflation. To put it another way, the toothpaste is out of the tube and authorities are trying to get it back in so that we all don’t have to resort to drinking powdered milk.