Q2 2022 / Strategy Update

Our base assumption last quarter was that equity market volatility would continue as long as uncertainty over inflation, interest rates, and the war in Ukraine persisted. We did not anticipate that strict lockdowns in critical economic centers in China would also disrupt global supply/demand dynamics, adding even more uncertainty and inflationary pressures to the mix. Stocks did not respond well to the lack of clarity on all of these issues.

U.S. stocks suffered their second worst start to a year in history, with the S&P 500 index declining by -20% and falling into bear market territory.Growth stocks and the tech-heavy Nasdaq led the way down, with the index dropping -22.3% for the quarter and -29.2% for the year-to-date.

The stock market’s -20% decline in 2022 arguably means a good deal of negative data and news has already been incorporated in current prices. Our goal now is to own companies we believe can generate solid earnings even in challenging economic conditions, and to remain positioned to capture upside before it becomes clear the economy will regain its footing—which we are confident it will.