Measures of inflation broadly retreated in 2023, but the level and future path of interest rates was firmly on investors’ minds. A shockwave rippled through the financial community in March with the collapse of Silicon Valley Bank (‘SVB’), triggered by the sudden rate rises from central banks to combat inflation. Concerned that this might be the canary in another GFC coalmine, investors flocked from equities to the safety of bonds. This effect was short-lived however and, despite renewed tensions in the Middle East, a US credit downgrade and debt-ceiling concerns, risk assets powered ahead albeit from a narrow technology-led base. Only late in the year, when central banks made more dovish noises (although without actually cutting rates), did bonds start to rally.

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