As is the custom to set goals for the calendar year ahead in January, a reflection of the year that passed is an important first step in contextualising the environment in which we are operating.

Higher inflation, rising interest rates, volatile markets, and the hopeful emergence from repeated, crippling lockdowns into life as we once knew it. All of these typified 2021 and will surely lay the framework for what we anticipate 2022 to be like.

Right now, all eyes are firmly focused on the US Fed:

• How quickly will they taper down the bond-buying exercise (aka printing money)?
• When will the Fed raise interest rates in an effort to stem multi-decade high inflation?
• Has inflation peaked in the US or not, and could we see even higher inflation as the year progresses?

Following last week’s meeting, Fed Chair Jerome Powell said, “Inflation is well above our longer-term goal… and problems have been larger and longer-lasting than anticipated…”. He then proceeded to announce the Fed’s decision to continue to inject liquidity into the world’s largest economy while keeping interest rates at record lows, not what one would ordinarily have expected.

All of this feeds the monster of uncertainty and, given the dominance of the US in the global economy, we should remember the adage that ‘When the US sneezes, the whole world catches a cold!’

But all hope is not lost. While the Fed may not have pulled the trigger on rates just yet, the expectation that higher interest rates and less-accommodative monetary policy is coming, has largely been priced into markets over much of last year. Emerging markets also look better-placed to weather a storm than in upward-moving rate cycles of the past: foreign-reserves, higher commodity prices, and even that emerging economies tend to be more ‘used to’ inflation, could all bode positively.

Late last year, on a trip home from a brief getaway, I was caught exceeding the speed limit, and was handed a rather hefty fine. On returning home I thought to take a chance and write to the regional traffic department and beg for clemency, stating how I was under the impression I was in a 120 zone and hadn’t noticed the sign indicating a lower speed limit.

To my surprise, it worked! I was granted an almost 70% discount on the fine – I was not only grateful for the leeway granted, but I even found myself excited to pay it. Which got me thinking about a similar approach to the current environment.

To be brutally honest, high inflation, rising interest rates, and slow growth do not make for a pretty picture – at least not in absolute terms. But in relative terms they reflect something else entirely.

This doesn’t mean that there is nothing to worry about. But as active investors, with the ability to adjust risk within our portfolios and diversify our holdings in an effort to have multiple strategies at play, the environment is slightly less scary. And with our SARB having raised rates twice already, it is comforting that the Beloved Country is ahead of the proverbial curve.

Our Debt to GDP ratio looks substantially better than previously feared, and our currency had a positive 2021 and in 2022, is holding its own thus far – the picture emerging may not be quite as bad as what we see on social media or in the news headlines.

Perhaps a little like getting a discount on your speeding fine!

Wishing you and your families a safe year ahead – may we all enjoy a year of greater freedom, enhanced stability, and only success!