Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

Up until last year, investors had experienced two decades of low inflation, falling interest rates,

and easy money. But since the start of this year, the winds of change

have been blowing quite hard. Inflation is rising, having hit 8.6% last week, the highest level

since December 1981. Monetary policy is tightening too, and we're seeing significant geopolitical

risks, the likes of which we've not seen in a long time.

According to a recent survey in the Financial Times, nearly 70% of leading economists expect the US economy to fall into recession next year.

The US Central Bank has begun what looks like will be one of the fastest

tightening cycles in decades. The FOMC raised interest rates from near zero in March to a target

range of 1.5% to 1.75% earlier this week, stating that they anticipate that ongoing increases in the target rate

will be appropriate.

The Fed Chair admitted that the path to bringing down inflation without causing significant

economic damage was not getting easier.

The Fed has committed to moving expeditiously to a neutral setting, one that neither stimulates

nor slows down growth, although Powell recently conceded that this threshold was not something

that we can identify with any precision. Rather, he vowed to keep pressing ahead until there was

clear and convincing evidence that inflation was

moderating. So is there anything that we can learn by looking at the history of asset returns

that might guide us in the markets that we see today? Well, the Global Investment Yearbook from

Dimson Marsh and Staunton, three professors from London Business School, is the

most comprehensive database of global investment returns available. It contains 122 years of global

market returns, collected from a total of 90 developed and emerging markets, and gives us the best

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