Heading into 2022, investors were optimistic. The economic recovery from the coronavirus pandemic had exceeded expectations and risk-assets had positive momentum after a year of robust gains. Even the Federal Reserve did not foresee the sharp and sustained rise in inflation and the aggressive policy response that would trigger tighter financial conditions and send the capital markets into one of the the worst downturns since the Global Financial Crisis. Russia’s invasion of Ukraine and China’s harsh COVID lockdowns were two unforeseen events that caused a spike in commodity prices and turmoil in global supply chains that fueled inflation. However, domestic forces were also factors, including the Fed’s slow response to the inflation threat and the overhang from the high fiscal spending during the COVID crisis. The ongoing struggle to subdue inflation and the risk of new shocks to commodity prices from geopolitical or idiosyncratic events will continue to be a major concern for investors in 2023.