Monthly Commentary | June 22

June provided little change to the general market trend we’ve observed throughout 2022 as markets continue to digest and price in the consequences of central banks needing to crush demand so that inflation can be reigned in.

 As we observed last month this painful medicine is a necessary consequence of the pandemic responses, but there seems little appetite for governments around the world to acknowledge this cause and effect phenomenon.  The preferred route out of this problem would be for growth to return to the global economy, but this is going to be very difficult to achieve given the geopolitical environment. 

In short, a world which is less keen to work together collaboratively to achieve more effective, efficient and smooth supply chains and production is going to have lower output and higher priced goods that one in which mutual growth and benefit is prioritised; but the optimal outcome requires all sides to desire that outcome and in today’s environment that isn’t happening.  The war in Ukraine is probably the most visible outworking of these tensions, but the Western-Sino relationship has soured considerably with a significant economic cost to all parties (of course whether or not this economic price is acceptable is a political judgement and it’s quite rationale to make the argument it’s a price worth paying – the point being made here is that there is a price, not whether or not it’s appropriate). 

At a more granular level, equity market falls of 4-9% during the month take the year to date losses to 16-20%, and bonds have also participated in the value destruction, with cash being the only sector to preserve nominal (but not real – ie inflation adjusted) value.