Investor Insights: May 2022

Global equity markets were flat for the month?(MSCI ACWI, +0.12%%)?as investors began to sense that, at least in the US, equity markets may have hit or are close to a bottom. US Treasury yields have also slid from their peak as preliminary data suggests inflation may be leveling off or even declining as global central banks grapple with how to handle stimulus injected to create demand during the pandemic. In large part, this demand has put significant pressure on supply chains over the last 12 months. However, some evidence shows that aside from China lockdowns, supply chains are easing significantly.

Further, mortgage rates declined in the last week of May but remained above 5%.?This has cooled the housing boom in the US, which declined 12.2% on a year-over-year basis according to Redfin. Fuel prices continue to remain high, largely spurred by the war in Ukraine and global demand. The war has put into focus the need by many developed nations to move away from fossil fuels as rapidly as possible.?

Much like the pandemic, which created a shock to the system of how people work, live, and spend and put more emphasis on the need to become less dependent on global supply chains, the war in Ukraine is providing more clarity as nations evaluate their ability to power their infrastructure.?Similar to calls to bring manufacturing home, countries will need to consider how to power their infrastructure to become less dependent on outside entities. For developed nations, the challenge is reconfiguring existing power systems and infrastructure. Meanwhile, developing nations have a somewhat cleaner slate.?Neither will be able to change overnight but, provided long-term thinking is applied and resources are available, the refocus will likely create opportunities set forth in the Sustainable Development Goals.

Until Next Month,

The 17AM Investment Team