2022 Second Quarter Commentary: What Got You Here, Won’t Get You There

Economic growth momentum rapidly eased during 2022’s second quarter as inflation pressures weighed on both consumer sentiment and spending. Now, as we move into the second half of the year, we continue to find ourselves having to navigate an environment characterized by multiple challenges: a geopolitical conflict in Europe, a shortage in the world energy supply and an economic slowdown that is being engineered by central banks globally to combat inflation.

In this commentary, we re-examine our past views, dive further into what may come next, and offer an inside look on how we plan to prepare portfolios so they can endure a potentially longer-lasting slow growth period.


  • Inflation remains center stage in guiding the direction of asset markets. Going forward, we see financial assets continuing to reprice towards longer-term average multiples, and markets assigning stronger attention to underlying cash flows and realistic growth expectations.
  • Recessionary fears took hold of the fixed income market during the back half of the quarter, and rising yields made a sharp U-turn as investors rushed into bonds to position for a global growth slowdown. This pricing suggests that the market hears the Fed’s hawkish messaging and views that its tightening policies will likely result in a recession.
  • Equity returns during the period were deeply negative as represented by the S&P 500 Index, which posted a -16% decline. Equities today are certainly more attractive than they were six months ago, but we are not yet outright bullish. We advocate being more reliant on active approaches to investing in this type of environment.
  • After another volatile quarter for markets, we continue to rely on alternative portfolios to diversify traditional stock and bond exposure and provide the ballast that we need to repurpose capital for tomorrow. The changing financial market mechanics we have covered in our commentaries over the past year or so are not going to be, in our opinion, short-lived episodes like of the past. Rather, these appear to be longer-lasting structural changes.
  • The tightening cycle is now well underway. Central banks certainly could pivot from their hiking stance if financial conditions were to deteriorate too rapidly, but we are of the view that this will be a longer-term endeavor given inflation is much higher and unemployment much lower than past cycles.

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