The stock market has had an up and down start to 2018. Volatility has made a comeback, after being mostly absent last year. This volatile climate over the first three months of the year resulted in most stocks either finishing down or around the break even point, with the Russell 2000 (small US companies) slightly down at -0.08% , while the S&P 500 (large US companies) is down -0.76%. International companies in the MSCI-ex USA Index have lagged on the equities side so far this year, down -2.04%. At the same time, with an uncertain and changing interest rate environment, the Barclays Aggregate Bond Index is down -1.46% YTD.
The first quarter has been filled with mixed emotions about the direction of the market. In January we saw the S&P 500 up 5.73% due to many positive forces including strong economic and wage growth, good earnings, low inflation, central banks that are not aggressively hiking rates, and tax cuts. These things all came on the heels of record low volatility in 2017.
February brought with it some uncommon territory, namely a market correction, which is a 10% drop in stock prices. Many variables sparked fears that inflation would increase at a quicker pace than expected, which could lead to more aggressive Federal Reserve policy as the Fed raises interest rates. With January’s overbought market, ever lower unemployment numbers and higher than expected wage increases, the market saw a sharp decline to start the month. After a couple of weeks, markets rebounded and although February was down for the month, markets were still positive for the year.
March has been full of madness, not only in the basketball tournament but also within the market itself. This has been a month of continued uncertainty as we process potential trade wars, the Federal Reserve actions and inflation data. All of these factors have culminated to an up and down finish to the 1st quarter--very much like the weather we are experiencing!
In today’s market environment, we believe our investment philosophy of focusing on valuation and investments with low volatility will help lessen the effects of a volatile market on your portfolio. This is why we do what we do, and why we continue to advocate for diversification within your investment portfolio.
As always, we sincerely thank you for the privilege and opportunity to help you achieve your financial goals. If you have any questions or concerns regarding your accounts or any other need we can help with, please do not hesitate to let us know. We wish you a blessed Spring season with warm weather and plenty of sunshine.