Current pricing in the bond market makes last year’s discussions about rate increases seem almost quaint. It was only a few short months ago that the debate was centered on two or three fed funds rate hikes during 2022. Instead, we have already had one increase, and the futures market is projecting over 200 basis points of additional hikes this year. Moreover, a number of economists are making the case that the market figure is too conservative. “Transitory” inflation is long gone from the Fed’s lexicon, as is the notion that inflation is simply a supply-side phenomenon created by supply chain disruptions. It turns out that monetary policy matters after all (Milton Friedman would certainly be nodding his head in agreement), as does pumping several trillion dollars into the economy. Covid has moved out of the daily headlines but remains a threat, particularly in East Asia where, of course, much of the West’s goods production is sourced. As if that were not enough, the tragic war in the Ukraine has the potential to impact the European recovery and has already added significantly to commodity price pressures. Our mission is to focus on financial markets, but if you will indulge a minor departure, we note that the Ukrainians are giving us all a lesson in patriotism, courage, and what fighting for freedom means.

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