The US Federal Reserve (Fed) and the European Central Bank (ECB) both delivered 25 basis points interest rate hikes, although neither definitively indicated that this would be their final upward move. Meanwhile, First Republic, another mid-sized US bank, was taken over after being hit by massive deposit outflows.

Fears of a banking crisis faded, with large US and European banks announcing sizeable first quarter profits. However, US investment bank JPMorgan Chase was forced into an emergency rescue of California-based regional lender First Republic Bank.  

In the run up to the COP26 climate change conference in 2021, major economies rushed to outdo each other on sustainability. Plans were announced to dramatically reduce the production of internal combustion engine (ICE) cars over the coming decade.

Elon Musk announced plans to build a competitor to ChatGPT, as part of his X branded ‘everything app’. The start-up is currently looking for engineers and investors. It has already amassed quantities of the Nvidia chips required to power a large language model capable of producing generative AI.  

The dilemma facing central banks, between tightening monetary policy and maintaining financial stability, was made clear by minutes from their March meetings, at which both the US Federal Reserve (Fed) and the European Central Bank (ECB) had raised rates by 25 basis points.

Financial markets were rocked by the collapse of two niche US lenders: crypto-focused Signature Bank and SVB Financial, the bank of choice for California-based start ups. 

The normally predictable banking sector has been catapulted into the headlines. Unfamiliar names such Silicon Valley Bank (SVB) and Signature Bank joined well known players such as Credit Suisse in facing collapse. Rescues and takeovers were swiftly arranged.

As stress mounted in the banking sector on both sides of the Atlantic, central banks were caught in a tricky position. While high levels of inflation have necessitated tighter monetary policy, central banks have been forced to increase liquidity to guarantee financial stability and reassure the markets.

Recent US economic data has been stronger than expected. Domestic unemployment is now at a 53-year low, while retail sales and business activity, particularly in the services sector, have accelerated.

Tensions between the US and China rose after the US shot down a balloon, which it alleged that China was using for the purposes of espionage. The US also warned China against supplying Russia with weapons, saying it could risk escalating the war in Ukraine.

Artificial Intelligence, or AI, has long been hailed as the most significant technological leap since the Industrial Revolution. After decades in development, AI could now finally be fulfilling its promise.

Ukraine marked the anniversary of Russia’s invasion, as President Biden, on a surprise visit to Kyiv, promised ‘unwavering support’. Energy price volatility remains high on the agenda, and with it the possibility of sticky inflation.

Inflation readings continued on a downward path, with the US and Europe as stand out examples. Nonetheless, western central banks maintained their hawkish rhetoric, with the European Central Bank in particular keen to forecast further interest rate hikes ‘at a stable pace’.

The headline rate of inflation continued to fall across most economies. US consumer prices rose at an annual rate of 6.5% for December, the lowest rate since October 2021, while headline eurozone inflation eased to 9.2% compared to a peak of 10.6% in October 2022.

China’s vast urban population was unlocked from Covid restrictions in time to travel home for the Lunar New Year. With over 2 billion journeys, it’s the biggest mass migration in the world. Concerns were raised that this potential Covid ‘super spreader’ event would overwhelm rural healthcare systems.

As all investors know, a dividend is a reward paid to shareholders for owning a company with sustainable profits. Used in the context of a nation’s population, the term ‘demographic dividend’ describes the positive effects that a growing population can have on a whole economy.

Confidence mounted that the point of peak inflation had passed, as readings from the US and Europe came in lower than forecast. Nonetheless, the ‘higher for longer’ message remains top of the central banks’ agenda, despite recommendations that the pace of interest rate cuts should be reined back.

Bond investors have been in for a rough ride over the past couple of years, with 2022 the second consecutive year of negative returns (tbc) for holders of fixed income securities. Yet the protracted sell-off could now mean that bonds are looking attractive again.