Despite forecasts of recession, GDP growth in the US has so far proved resilient and US inflation has beaten forecasts. Conversely, in China the recovery has yet to fire up and consumer price growth is subdued.

As we enter the dog days of summer, markets are struggling to find conviction, overshadowed by the possibility of recession. Meanwhile core inflation remains sticky and labour markets are still tight.

Clouds of uncertainty still hang over financial markets, whether about inflation, recession or the peak in the interest rate cycle. Throw in the brinkmanship surrounding the US debt ceiling and it’s no wonder markets have been range bound in recent months.

Equity markets have spent the last month moving in a relatively narrow range. There seem to be multiple headwinds. Even before the regional banking crisis in the US, higher interest rates have curbed the demand for credit, while core inflation remains stubbornly high.

After the turbulent days of early March, markets now seem to view the banking crisis as a small number of idiosyncratic events. And yet a broader credit squeeze remains a possibility, which could rein in economic growth.

February proved disappointing for markets, as stronger economic data crushed expectations of falling inflation and an early pivot in interest rates. Central bank rhetoric has become more hawkish and higher terminal interest rates are now forecast.

Markets have rebounded in 2023, as deeper recession fears fast became a thing of the past. Hopes are growing for a softer economic landing, despite persistently hawkish central bank rhetoric.

Financial markets had a tough time in 2022, leaving investors with ‘nowhere to hide’. Central banks were blamed for their aggressive game of interest rate catch up, as inflation soared to levels not seen for decades.

Financial markets have been battered by runaway inflation and fast rising interest rates. So much so that 2022 will go down as the year where there was ‘nowhere to hide’. But as the year ends, inflation could perhaps have hit its high water mark.

Financial markets have been battered by runaway inflation and fast rising interest rates. So much so that 2022 will go down as the year where there was ‘nowhere to hide’.

This has been called the ‘make or break decade’ for action on climate change - perhaps the most urgent challenge of our time. COP27, the UN climate conference, has now drawn to a close. But the burning question remains. Will the commitments made by major economies prove to be sufficient?

As this extraordinary year draws to a close, records for extreme performance continue to be smashed by equity, bond and currency markets. It’s all down to the central banks and their response to runaway inflation.