• The Powell pivot became the major talking point last week. During his testimony to Congress he said that the Fed does need to talk about a faster rate of tapering. He also pushed inflation concerns up the agenda. No doubt part of this was in response to the White House putting tackling inflation as a priority. As a result, there was a meaningful increase in interest rate expectations over the week.

• The encouraging thing from last week was the reaction of the fixed income markets. Our fear has always been that as we moved towards normalising monetary policy, there could be a lot of volatility in the bond market which would undermine all asset classes (an interest rate scare). That did not happen last week. Yes, there is a bit of pain in the short end but longer dated yields fell and that is what is important to other asset classes.

• Of course, Omicron is in the background and there is risk that its spread causes dislocation in the global economy. Perhaps this is what the bond market is thinking. One problem with this thinking is that if the dislocation does become significant then monetary tightening probably goes off the agenda. The Delta variant did cause some turbulence in the global economy and in equity markets but the growth rate remained high and the impact was short lived. Using that as the ‘playbook’ it says stick with your long-term strategy and that is what we will be doing and looking at last week’s reaction in the fixed income makes us a little bit more comfortable about that.