2022 Second Quarter Commentary

This quarter was a rocky one, as has been the year.  Since the all-time peak on the first day of the year, the stock market has fallen in waves, likewise for bonds.

From an economic standpoint, inflation is triggering a hawkish central bank interest rate policy, i.e., higher short-term interest rates.  While the U.S. Federal Reserve has acted strongly according to its stated commitments to markets, they cannot insure the survival of financially at-risk organizations.  We’ve seen this occur with the bankruptcy of badly financed vehicles, e.g., the Celsius Network crypto fund (not one of ours).

Markets look to the future, not the present.  Anything can happen.  Ahead could be a short-term recession or a longer-term one.  The current level of high inflation could be temporary, or it could be more enduring. Evidence suggests we’ll experience something at least in the middle of the spectrum.

​Markets are not fully pricing dire possibilities.  That said, markets tend to predict future upturns fairly well, historically advancing about half a year ahead of a turn toward positive economic growth.

How far down have markets dropped?  Not far, relative to history.  There’s nothing to be said that prices have fallen enough to bring in buyers and exhaust motivated sellers.  While we’ve performed well in this downturn so far, it’s very possible that the downturn might not yet be over.