Economic Update March 2022

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Conflict threatens the recovery

Monetary policy tightening expectations have firmed significantly, although the Russian invasion of Ukraine precipitated sharp risk-off moves in markets and a partial retracing of hawkish policy expectations. The outlook remains exceptionally uncertain, with inflation a key focus. This comes at a time when many economies remain vulnerable and is making the already challenging job of central bankers even harder.

At the time of writing, markets expected the Federal Reserve (Fed) to hike around five times by year-end. Given the outsized importance of the Fed for the stance of global monetary policy, these rapidly changing expectations have rattled markets with equities falling sharply and yields firming materially. But the Fed is by no means alone with a re-pricing of policy expectations across many developed economies as inflation has proven stronger and more persistent than expected.

This path to higher rates will be a headwind to returns in both equity and fixed income markets. However, the current environment looks particularly favourable for alternative asset classes, namely real estate and infrastructure. This is because these asset classes tend to provide a more effective inflation hedge (often with explicit contractual links to inflation) and also benefit from stronger economic growth.

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Meet the authors


Alex Joiner

Alex Joiner is Chief Economist at IFM Investors. He is responsible for the firm’s economic, financial market and geopolitical risk analysis that is key in IFM’s investment process. In this capacity he engages with IFM’s domestic and global clients on macro-investment trends and themes.

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Frans van den Bogaerde

Frans supports the Chief Economist with the firm’s economic, financial market, and policy analysis and forecasting. He holds a Bachelor of Commerce (Finance & Economics) with Honours in Finance (First Class) from the University of Melbourne.

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