The first half of 2022 marked to worst loss for the stock market since 1970 with the S&P 500 retreating 21%. That was coupled with an 11% drop in bonds and a 22% drop in the real estate. Those losses all pale in comparison to crypto as Bitcoin fell 57% and Luna lost 100% of its value in the first half. Many commodities joined the dismay as lumber and copper also fell precipitously. About the only thing that did appreciate was oil which rose 42% in the first half. But as I stated in my last update, there are signs oil may be rolling over its 8.5% decline in June.
It would be highly unusual to see nearly every other asset in steep decline without oil eventually joining the fray. Clearly consumers have adjusted their budgets and high prices tend to naturally roll over given the nature of cash flow. The surprise for the second half of 2022 would be that inflation withers and the Fed relaxes its tough stance. Assets are not pricing in that possibility and the negativity is overflowing. The slightest positive news, be it continued oil decline or peaceful geopolitical developments, could mark the end to this downward cycle and investors should be positioning accordingly. Right now, we are gradually increasing investments trading below their intrinsic value and examining pockets of fixed income as long rates may have peaked. As always, I appreciate the continued trust and confidence.