The Monthly Mosaic | March 2022


TRANSCRIPT

It continues to be a very rocky environment here in the first quarter of 2022. We started the year with significant volatility really around them, what's the Federal Reserve gonna do? Are they going to move faster? Inflation was also picking up in an investor's mind. So we saw, you know, significant declines early on more recently. You know, the Russian invasion of Ukraine has been on everyone's mind, certainly believing that that's a lot of what's behind the volatility. But as we moved here to this week, and we finally got that first 25 basis, point rate hike, markets were pretty stable along with that announcement. And also when you look at since invasion, the s&p 500 is actually up about 3%. So we've actually seen more of the volatility going into the invasion and markets and will behave better here domestically, with more or less volatility, at least downside volatility moving internationally and seeing the emerging markets developed markets, particularly Europe and European banks doing poorly, along with Russians invasion of Ukraine.

With the S&P 500 index declining about 13%, from peak to trough here in the first quarter, a lot of investors are wondering is it time to add to equity or risk assets. And certainly, 13% is a sizable correction. So even though valuations have improved, there are a few things that are still on our mind when we're looking at adding equity risk that have made us a little bit hesitant to add quite yet. When you look at the yield curve, it's very flat and especially relative to when you first see a normal interest rate hike campaign going on, it's signaling to us that certainly likely that the bond market thinks that the overall economy is going to slow and inflation will also slow along with it. earnings estimates have actually stayed high, and they haven't come down quite yet. So that's been a positive. So they've been unscathed up to this point. But we really want to see visibility after the first quarter to see what companies are saying to given all these immense cost pressures that they're that they're undertaking right now. And then finally, you know, some type of resolution within the war in Ukraine would certainly go a long way to helping our comfort level and adding to risk assets.

We continue to see real assets in particular commodities is a good place for not only a store of value, but also an inflation hedge in this environment. We anticipate that energy commodity prices are going to remain high even if there is some type of resolution within the war in Ukraine. And then finally, we don't necessarily expect that commodities have a lot of upside. They've already increased a lot. But again, it's just a good store of value in this type of uncertainty in this market environment.

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