The year started optimistically with a strong January rally for equities and fixed income markets reacting positively to the decline in inflation and the prospect of easier monetary policy.
However, expectations shifted with stronger than expected US job market data, leading to fears that interest rates would have to continue higher. The increased volatility this caused was then exacerbated towards the end of the quarter, with concerns over the health of the global banking sector.
In addition, reviews of the regulatory frameworks within both Europe and the UK have continued to progress. In the UK, the PRA (Prudential Regulation Authority) gave a speech to the ABI (Association of British Insurers) covering fundamental spreads and the risk margin under the Solvency UK regime and gave a separate speech identifying the need for insurers to reassess existing risk models and conduct stress testing that also better considers management actions. In addition, the Bank of England published a report outlining its concerns that climate related risks are not accurately reflected in the existing capital framework for insurers.
This is a financial promotion and is not investment advice. The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.