July was a strong month for equities, after a rough first half in 2022. Despite ongoing concerns of economic growth and inflation, the US (9.2%) had its best month since November 2020.

Milton Friedman famously declared that inflation is “always and everywhere a monetary phenomenon”.

Investors are currently grappling with the question of whether the recent rise in interest rates will lead to an economic slowdown (soft landing) or an economic recession (hard landing).

Record high inflation, rising interest rates, and recession fears led stocks and bonds lower in the second quarter of 2022 (2Q22). For just the second time in 40 years, bonds and stocks both posted losses for two consecutive quarters.

Behavioral science tells us current events have a greater impact on our perception and decisions than the past.

After stellar economic growth in 2021, the US economy declined 1.4% in the first quarter of 2022. This was the first contraction of the economy since the beginning of the economic recovery in 2020.

Bonds are off to a rough start in 2022. The Bloomberg US Aggregate Bond Index, the proxy for core US bonds, has declined nearly 6% in the first three months of 2022.

The war in Ukraine, surging inflation and rising interest rates led markets lower in the first quarter. After a strong 2021, US equities saw its first quarterly loss in two years.