Toroso Market Commentary for 2nd Quarter, 2022


Central banks and companies around the globe are hesitant to provide guidance. With Q2 GDP estimates coming in at -0.9%, we have entered a technical recession, although not a political recession apparently. Many have wondered how the Fed expects to effect supply issues in both energy and food. The scary answer? They know they can’t. The Fed’s actions hope to make you think twice about spending. They cannot affect supply, but they can slow the velocity of money to the point where demand will come down and prices will balance out. The Fed is playing a game of chicken. On one side is the value of our collective assets; on the other is our demand for all things, especially food and energy. Central banks are fighting for their credibility, and reputation, which is a dangerous place to be making such decisions from.

It is quite an odd year. The 60/40 portfolio had its worst start to the year ever. Everyone but aggressive, primarily equity investors felt pain in terms of returns, not too dissimilar to 2008. Inflation actually hurts a greater portion of the population than just a traditional recession. In a traditional recession, unemployment may tick up to 8-10%, mostly affecting those who lose their jobs. Inflation effects everyone’s purchasing power, which is a foreign concept to most market participants in America. This is white collar recession, not a blue collar one. Your bonds and cash aren’t safe, but the US dollar is king. The dollar and the euro reached parity, exporting our inflation to economies around the globe. It’s a confusing time to be an investor. Sentiment has never been lower, and while we are raising rates at the largest magnitude in over 15 years, how much worse can the market get if employment stays relatively high?


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