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ResearchMay in review

May in review

Jun 10, 2022

In late May, our team published a memo that discussed what’s changed in the world, what we’re doing about it, and what we expect from here. We had an active start to May and plan to continue picking our spots as long-time watchlist names are finally approaching striking range. We believe we remain quite defensively positioned, and you can expect us to be patient yet tactical through this historic stretch.

Below we’ve detailed three main drivers for markets this month:

1. Speculation around peak inflation: The S&P 500 flirted with bear market territory in the middle of the month before a quick bounce fueled a strong rally into June. Many believed May marked peak inflation, but as shown by the CPI print (a commonly used measurement for inflation) this morning, inflationary pressures continued to accelerate higher. We expect high prices to persist for at least the next several quarters; however, our focus on investing in companies with robust cash flow remains unchanged. We’ll leave the speculation to others.

2. An infamous month for crypto: We witnessed the largest single-asset wealth destruction event in crypto history just weeks ago. Terra’s LUNA and stablecoin UST’s collapse sent shockwaves through the ecosystem. Long-term conviction in the asset class remains unchanged as institutional capital continues to flood into the space, legacy financial firms bolster their crypto offerings, and policymakers come across the aisle to work together. Fundamentals are in an exponential uptrend, but macro headwinds are owning the narrative - for now. You can read our crypto update here.

3. The consumer stays strong, with a bit of help: Americans have always had a knack for spending money, and in May, they turned out once again. Consumer spending rose 0.9% in May, supported by robust demand for travel and experiences. However, the household savings rate dropped to its lowest level since 2008 as consumers increased their reliance on credit cards and other forms of financing during the month. While fatigue from higher prices may be setting in, we will continue to closely monitor intra-quarter credit card/alternate data trends in the event these headwinds catalyze a potential deterioration in consumer balance sheets.

We will continue to provide updates throughout this correction, but please reach out to our team with any questions. Thank you as always for the trust in managing your capital. Have a great weekend!

Onward,

Titan Investment Team

Revisit trade updates from May

Titan Trade Update: Shopping the sale rack

Titan Trade Update: Inside the collapse of UST and Terra (Luna)

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