Let's talk about our portfolios 😬

Good morning. The supply chain woes of the pandemic show no signs of easing up. There's now a global shortage of sriracha, but if you're in B.C., you may be in luck: Andrew Betteridge, the owner of Lucifer's House of Heat, can hook you up with some spicy alternatives.

In this edition:

📉 What's happening to our portfolios💄 Revlon is on its last legs🙃 Cryptocurrency meltdown

- Vindhya Kolluru, Editor

MARKETS

Portfolio in red

To say this week has been rough for the stock market would be an understatement (hello 20% portfolio drops 😵). Even Drake’s surprise album can’t distract us from the fears of a looming recession, which have hit the markets hard as the S&P 500, Dow Jones and TSX notched their worst weekly declines since the height of the pandemic in 2020.

After an almost 11-year bull run (an extended period when asset prices rise), we are now entering a bear market (a drop of 20% or more from recent highs in major stock indexes such as the S&P 500 or Dow Jones).

Why is this happening? Aggressive interest rate hikes that are meant to rein in inflation now risk slowing down economic growth (or worse, tipping us into a recession), which is weighing on investor sentiment.

• The U.S. Federal Reserve announced a 75-basis-point (aka 0.75%) rate hike (the biggest in almost three decades) to tame white-hot inflation, sending markets into a frenzy. Canada’s benchmark stock index, for instance, closed below 19,000 for the first time since April 2021. Central banks around the world, including Taiwan’s central bank, the Swiss National Bank and the Bank of England, followed in the Fed’s footsteps with their own rate hikes to control soaring inflation.

I’ll see your 50, and raise you 75: Some economists expect the Bank of Canada, or BoC, to follow suit with its own 75-basis-point interest rate hike at its next policy decision meeting in July. If you recall, the BoC raised its key interest rate by 50 basis points in June to 1.5%.

• In the meantime, Deputy Prime Minister and Finance Minister Chrystia Freeland announced new measures to help Canadians cope with the rising cost of goods. The initiatives, costing a combined $8.9 billion, include a boost to programs such as the Canada Workers Benefit and the federal child and dental care plans.

The bottom line: While these policies may ease the burden in the short-medium term, policy changes will be needed to address a (potential) recession and what follows.

— Sabrina Dotsch

On our radar

• A former Goldman Sachs executive, Jamie Fiore Higgins, is releasing a book in August that alleges abuse in the highest ranks of the investment banking company. You can read a preview of it here.

• Shelly Haus, chief marketing officer at Ulta Beauty, died from cancer at 49 years old last week. Haus, a marketing veteran, was a fierce advocate for diversity during her tenure at the beauty retailer.

• Pegah Ebrahimi and Wesley Chan raised a US$450 million fund to debut their venture capital firm, FPV. The fund will support early-stage ventures targeting the consumer, enterprise and healthcare industries.

• The tech industry is bracing itself as Federal Trade Commission, or F.T.C., chair Lina Khan forges ahead with her agenda to rein in Big Tech during her second year in office. (Get to know the F.T.C.'s youngest-ever chair here.)

RETAIL

Cosmetic chaos

Last week, Revlon, the cosmetics brand reminiscent of the Y2K era, filed for Chapter 11 bankruptcy protection in the U.S. after grappling with mounting debt, logistical challenges and growing competition in the beauty industry.

Some context: For almost 90 years, Revlon has been a leading company in the cosmetics industry — it made its name selling nail polish during the Great Depression. However, in recent years, Revlon's marketing and sales strategy — namely, selling products in drug stores and advertising through traditional channels — is being upstaged by influencer and celebrity cosmetic lines that interact directly with consumers via social media, such as Kylie Cosmetics and Rare Beauty.

The intense competition with cosmetic upstarts has led to Revlon taking on an enormous amount of debt, with the tipping point for the brand being major supply chain issues.

• David Garfield, a consumer industry expert, put it best in an interview with The New York Times: “The issue there is that it can become a vicious cycle: So supply chain disruptions can cause production delays, which can cause late shipments to retailers, which can cause loss of shelf space and sales — and then the cycle repeats.”

Why it's a big deal: Experts anticipate soaring inflation and rising interest rates will force people to dial back their spending on things like clothes and makeup, which could pressure more retail companies into reorganizing their assets.

— Ally Hays-Alberstat

CRYPTO

How a Canadian pension fund got sucked into the Celsius meltdown

Canada's second-biggest pension fund, Caisse de Dépôt et Placement du Québec, or CDPQ, has been swept up in the drama surrounding Celsius Network, an embattled cryptocurrency lender.

Back up: Last week, Celsius Network, a gigantic centralized cryptocurrency lender with 1.7 million customers, announced it would pause all withdrawals and transfers, citing the steep decline in the cryptocurrency market. (For investors, it's the equivalent of getting dumped over text.)

Of course, pausing transactions prompted a sell-off that pushed the cryptocurrency market further into a meltdown—the price of Bitcoin tumbled below US$20,000 for the first time since December 2020 this past weekend.

Why it matters: CDPQ participated in a US$400 million round to invest in Celsius Network back in October 2021, marking the pension fund's first move into the digital asset sector. And if Celsius can't make good on its investors' cryptocurrency, the pension fund risks losing out on its investment.

• Yet, CDPQ doesn't seem to be too worried. A spokesperson for the pension fund defended the cryptocurrency lender, telling The Globe and Mail that "Celsius has been impacted by very difficult markets in recent weeks." Haven't we all?

Zoom out: It's hard to say yet whether institutional investors like CDPQ will be warier about investing in digital assets in the future. Jarrett Vaughan, a business professor at UBC, told the Globe: “With risk can come reward, so if you’re investing into a risky environment like crypto, you have to be aware of something like this happening." Wise words, tbh.

FYI: Check out this guide for an explainer on all things cryptocurrency.

— Vindhya Kolluru

Other things we read and we liked

🩺 A long read on the unexpected dark side of medical influencers

💕 Here’s a neat visual to remind you what showing up every day actually means.

🐶 Portrait illustrators are making bank off of our love for our dear pets.

📲 If you’re in need of a social media detox, we recommend this useful Chrome extension that blocks features like the Instagram Feed and Stories.

🏀 Nakissa Koomalsingh founded HoopQueens, which is being billed as Toronto’s first paid women’s basketball league. Read all about it here.

🏠 For sh*ts and giggles: Here’s what around $2 million gets you in Scottsdale, Arizona versus Toronto.

🥤 Experts say the 'healthy' Coke recipe going viral on TikTok isn't all that healthy.

🤝 Now hiring

Want to get a jump on finding your next role? Here are this week's featured job openings:

• Marketing Content Manager at Knak (Ottawa, O.N.)

• Engineering Tech Lead at Workstream (Vancouver, B.C.)

• Associate Partner - Investment Consulting at Aon (Toronto, O.N.)