International and Global Markets Commentary & Investment Outlook: International and Global Growth Equities


Equity markets declined significantly in the second quarter and exhibited heightened volatility in reaction to an increasingly gloomy outlook. It was only several months ago that the world economy was on track for a strong, albeit uneven, recovery from the pandemic. However, supply chain disruptions, the war in Ukraine, and shutdowns in China have dealt a serious blow. Central banks are aggressively tightening in order to moderate inflation. Growth is set to be markedly weaker in almost all economies. Countries are being hit by higher commodity prices, which add to inflationary pressures and curb real income and spending, further dampening the recovery.

Our investment philosophy, which emphasizes businesses that benefit from secular trends and possess strong competitive advantages, means that portfolios should be able to outgrow the market over the long-term. Furthermore, in response to the inflationary environment, we have made ongoing adjustments to portfolios by emphasizing holdings we believe are well-suited to transmit pricing power or are valued more attractively. These attributes should help protect against two of the most pernicious effects of inflation for equity investors, namely the compression of profit margins and the compression of valuation multiples. Thank you for entrusting us to invest your precious capital and to navigate this increasingly uncertain market environment.


The Federal Reserve (Fed) is watching each incoming data point on inflation worriedly and is rapidly raising interest rates to wrestle this problem under control. Personal consumption expenditures (PCE) inflation, which the Fed officially targets, climbed 6.3% on an annual basis and 0.6% on a sequential basis in May. While these figures showed a glimmer of moderation, they were far from conclusive. Consumer price index (CPI) inflation, which is calculated differently and tends to be higher than PCE inflation, jumped 8.6% in May. That was the fastest increase in more than forty years. According to the University of Michigan consumer sentiment survey, longer-term inflation expectations have remained fairly steady, although short-term expectations have surged.