January was a turbulent month for equity markets. There was a sharp increase in volatility as concerns around inflation, central bank tightening and the tensions in Eastern Europe crept in. Growth stocks that were trading on high valuations came under increased selling pressure, whilst rallying oil and gas prices and higher US treasury yields saw energy and financial stocks outperform the rest of the market. Global bond markets fell last month, and whilst they outperformed equity markets, investors were reminded that they provide much less protection in the current heightened inflationary risk environment than they would in times of recessionary risk. UK equity markets outperformed developed markets as it benefited from large weightings to commodity stocks and financials in conjunction with a low weighting to technology stocks trading on higher P/E ratios. The markets perceived a hawkish shift from the Fed language and that central banks have moved to believe that inflation is more persistent than they had initially thought. Looking ahead, inflation seems likely to continue to rise in the short term, particularly in Europe where power prices are applying further upward pressure. Central banks are now committed to increasing rates in Q1, but the pace of tightening will remain dependent on the underlying drivers of inflation such as wages and demand.