Both for the quarter and year-to-date, volatility was up and prices were down across major asset classes, particularly in equities and fixed income. On the equity front, the MSCI All World Index has declined 13.1% for Q2 and 17.6% YTD; the S&P 500 is off 13.6% and 17.6% respectively for the same periods. After a weak 2021 relative to developed-market indexes, Emerging Markets have fared a bit better so far this year, with the MSCI Emerging Markets Index off a slightly gentler 9.2% in Q2 and 15.5% YTD. On the bond front, the broad U.S. fixed income benchmark, the Bloomberg Aggregate Bond Index, has fallen 5.7% in the quarter and 11.2% YTD. Gold, that traditional shock absorber against market bumps, is unchanged for the year to date, but has given up 5.9% in the quarter as the dollar surged to historically high levels. We view gold as an alternative currency, and therefore believe that its recent ebb is somewhat rational in response to dollar strength. However, as U.S. and global growth slow, I believe that gold is reasonably well positioned to outperform a broad mix of global fiat currencies. Energy is of course up dramatically, with WTI crude oil rising 9.2% in Q2 and 45.7% YTD; natural gas prices in North America have gained 15.2% during the quarter and 74.2% YTD. With that said, domestic prices have trended lower over the last few weeks: the back half of June has seen oil correct by 11.0% from its recent peak, with U.S. natural gas retreating an eye-catching 33.1%. Prices in Europe do remain quite elevated, clearly in response to sharp supply constraints from the war in Ukraine and Russia’s decision to withhold flow.
Quarterly Market Outlook
The Clear Harbor Market Outlook is a quarterly market update.