Second Quarter 2022 Market Newsletter

Markets

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EXECUTIVE SUMMARY

Global stocks, bonds and commodities fell in the second quarter of 2022. The US dollar appreciated versus a basket of other currencies of developed countries.

Record high inflation and the Federal Reserve’s attempts to curb it by raising interest rates have caused recession worries.

Supply chain constraints are easing, and manufacturing demand is dropping suggesting inflation may have peaked.

Stocks and bonds which have moved in opposite direction in past years, have moved together this year reducing the diversification benefit of having both in a portfolio. However, bonds still provide ballast and are a source of income in a portfolio.

US corporate earnings are expected to have grown by 4.3% in the second quarter. Current 12-month forward price earnings ratio of US stocks are lower than their 25-year average.

Reducing exposure to stocks when a recession is called would lead to missing future performance because stocks usually bottom out well before a recession is called.

Since there is no proven way to consistently invest during the best periods or avoid the worst, the best course of action is to invest for the long term. Missing a short period of market performance can have a significant impact on portfolios.

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