The good news is that 2022 finally saw the world shake off the grip of Coronavirus as it transitioned from a pandemic to endemic (albeit it’s still causing problems in China). However, the past year turned out far more difficult for investors than might have been

Economic and financial commentary has been particularly gloomy of late, with talk of a “dire”, “grim”, “bleak”, “perilous” and “confronting” outlook.

The impact of interest rate rises will hit consumers harder in Australia compared to some of our global peers. In the short term, this is negative for consumer spending in Australia but in the medium term it could be positive for the economy because it should mean that the RBA does not need to raise interest rates as much to get demand and, therefore inflation to slow.

While we are optimistic on a 12-month horizon, shares are at high risk of further falls and a re-test of their June lows in the short term given hawkish central banks, heightened recession risks and geopolitical risks.

Early signals that of a peak in inflation led to an initial rebound in sharemarkets from their June lows as markets got excited that central banks would start to ease up on aggressive rate hikes.

Investment markets are driven by more than just fundamentals. Investor psychology plays a huge role and helps explain why asset prices go through periodic booms and busts.

Share markets had another volatile week with worries about central bank rate hikes and Chinese covid lockdowns depressing global growth but generally good earnings news.

A budget windfall has allowed both more spending and lower budget deficits, with the 2022-23 budget deficit expected to be $80bn (down from $99bn in December).