
AN UNNERVING YEAR FOR INVESTMENT MARKETS
This year started with the promise of a progressive economic recovery as societies returned to a "new" post-Covid normal. Unfortunately, Russian President Vladimir Putin had other ideas when he attacked his neighbours Ukraine in February in an unprovoked act of war, changing our economic expectations for 2022. In response, commodity, energy, and food prices soared to multi-year highs, causing inflation to spiral upwards. In the charts below, the oil price increased from $78 at the start of the year to a peak of $128 per barrel before declining to $94 (figure 1). Natural gas prices (figure 2) reached a high of $9.68 before falling to $5.98, while the price of wheat rose to $12.87 (figure 3) before retracing to $8.28 per bushel. These are products for which Russia and Ukraine are significant exporters to the rest of the world.



Swift and far-reaching economic and financial sanctions imposed on Russia by the United States, Europe, and other NATO-aligned countries added to the heightened level of uncertainty and even talks of a possible third world war. The displacement, injury, and killing of the Ukrainian people, together with the destruction of their cities, is deplorable and heart-breaking. Reserve banks worldwide embarked on a series of interest rate increases to combat rising inflation. The IMF/Bloomberg graphic below illustrates the extent of the tightening of monetary policy since the end of 2021. In South Africa, the SA Reserve Bank increased the bank rate from 3.75% at the start of the year to 7% presently, with further increases forecast in the coming months.
