A difficult first half-year is over. Practically all asset classes show a negative performance in the sixmonths to end-June. Central banks face tough policy decisions, the effects of which could be troublesome for capital markets.

While the Fed raised rates aggressively in line with its previous communication to markets, the SNB surprised with a 0.5% rate hike. And the ECB is still looking for a solution to its Gordian knot – the fragmentation under pressure of markets within the Eurozone.

The combination of a tighter monetary policy by the U.S. Federal Reserve and sales in U.S. government bonds from Japan are increasing the pressure on U.S. interest rates. Effects on the stock markets cannot be ruled out.

The U.S. Federal Reserve raised the key interest rate by 25 basis points on Wednesday and held out the prospect of six more interest rate steps this year.

The eagerly awaited meeting of the European Central Bank (ECB) has taken place. The key interest rates remained unchanged. The bond-buying program is to be reduced more quickly than previously expected by the third quarter. The ECB is distancing itself from lower interest rates in the future. However, an interest rate increase is not envisaged for the time being.

Russia’s warlike offensive has met with surprisingly fierce resistance within the Ukraine. The Ukrainian side is also receiving weapons from the West. The situation is in flux.

Russia has begun its invasion of Ukraine. Explosions are reported from various cities. Stock markets are correcting worldwide and safe havens are being sought by investors.

ECB President, Christine Lagarde has changed the tone of her commentary and now holds out the prospect of a reduction in monetary stimulus, albeit on a far more timid scale than that being planned by the Fed. Only after the US mid-term elections is a Fed policy shift, back in the direction of easing, likely.

Fed commentary on plans for a possibly rapid tightening of monetary policy is likely to be followed by some rather half-hearted action. Indeed, we see the markets forcing the Fed to back off from any aggressive tightening of policy. Financial markets are likely to remain volatile until the US midterm elections in November.