Market Commentary — June 11, 2022

The U.S stock market ended the quarter officially in bear market territory, down more than 20% for the year. While there have been multiple factors causing the market to experience its worst first half of the year, since 1970, the cause can really be synthesized into one word: inflation.

In order to curb runaway inflation, the Fed has been aggressively raising interest rates, playing catchup with 1.5% worth of rate increases, with more to come. The supply chain constraints the Fed thought would be “transitory” and ease, proved to be longer-lasting, exacerbated by the Russia-Ukraine war and rising energy prices.

So what does all this mean for client portfolios? And will the Fed’s actions, cure inflation, but plunge the economy into recession? Indeed, there is evidence that we may be in a recession already if you use the “two-quarters of negative GDP” definition. While only the OECD can make that official pronouncement, if I were to call it, I would say we are already in a recession. That may actually be good news for investors, as it means the Fed will have to be less hawkish going forward. If you look at the yield curve, the bond market is already looking ahead to the first Fed rate cuts.

Whereas we were advocating for interest rate hedged bond exposure, now that the impact of Fed cuts is being felt, we are favoring unconstrained fixed income exposure, with a quality tilt. We are optimistic about market prospects in the second half and expect the market to recover much of its first-half bear market losses.

If we are in a recession, it is a unique animal characterized by a strong job market. The consumer is quite healthy, resulting in not “demand destruction” but “demand discretion.” There continues to be pent-up demand for travel, entertainment, and apparel, and savings levels are still healthy.

The Fed may not be able to execute a precise soft landing, but it should be able to bring inflation down to manageable levels without creating too much economic pain.

Jane Edmondson
CEO and Co-Founder

Share this Market Commentary


EQM Indexes LLC is a woman-owned firm dedicated to creating and supporting innovative indexes that track growth industries and emerging investment themes. Co-founded by Jane Edmondson, a former Institutional Portfolio Manager with more than 25 years in the investment industry.


The information provided on this page is for illustrative purposes only and is not intended to serve as investment advice. The information provided is as of particular time and subject to change at any time without notice.

It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments based on that index. EQM Indexes does not sponsor, endorse, sell, promote or manage any investment fund or other investment vehicle that is offered by third parties and that seeks to provide an investment return based on the performance of any index. EQM Indexes Indices makes no assurance that investment products based on the Index will accurately track index performance or provide positive investment returns. EQM Indexes is not an investment advisor, and makes no representation regarding the advisability of investing in any such investment fund or other investment vehicle. A decision to invest in any such investment fund or other investment vehicle should not be made in reliance on any of the statements set forth in this article. Prospective investors are advised to make an investment in any such fund or other vehicle only after carefully considering the risks associated with investing in such funds, as detailed in an offering memorandum or similar document that is prepared by or on behalf of the issuer of the investment fund or other vehicle. Inclusion of a security within an index is not a recommendation by EQM Indexes to buy, sell, or hold such security, nor is it considered to be investment advice.