Broad equity markets posted positive returns in the second calendar quarter, rebounding from the modest declines of Q1. While the news flow regarding continued economic growth and strong corporate earnings was generally positive, the market struggled for direction amidst longer-term uncertainties regarding the duration of the current economic cycle. As we discussed in our note last quarter, this is consistent with a market in transition, as the outlook for better growth also signals the latter stage of an economic cycle that now exceeds nine years.

Since we last distributed a special commentary on general market conditions (MARKET PERSPECTIVE, FEB 6, 2018), stocks have rebounded from lows established on February 8, recovering most of the 10% decline. Thankfully, what we experienced then was an overdue, “normal” market correction, not the beginning...

It was the third quarter of 2015 that stocks last turned in negative returns, triggered by recession fears and collapsing oil prices. While this quarter’s market decline of 1% - 2% came amidst stronger economic trends and positive earnings news, the modest loss masks a 10% correction from the January highs.

Another sharp drop happened on Thursday, similar to last Monday’s (Feb. 5) decline. Our conclusion remains the same, as stated in our February 6 memo – “Perspective on Markets”. Our view is that this is an overdue valuation correction, which we do not expect to...

The stock market’s dramatic 8% drop in the last six trading days is breathtaking and disconcerting, especially yesterday’s 4.1% decline. Our view is that this is an overdue valuation correction, which we do not expect to escalate into an all-out meltdown or crash. While we...

A strong fourth quarter gave stocks their best year since 2013.  Broad equity indices hit multiple new highs as volatility remained historically low through year end.  Feeding off the momentum that began in late 2016, the S&P 500 finished the 2017 calendar year without a single down month for the first time since 1970.

Bond returns were generally positive for the year as longer-term interest rates ended the year somewhat lower compared to the beginning of 2017.  Shorter-term rates moved noticeably higher in the fourth quarter, most likely in anticipation of additional rate hikes from the Federal Reserve in 2018.

Stocks added impressively to their gains of the first half, marking the eighth consecutive quarter of positive returns for most broad based indices. Much of what transpired in the markets fit the “more of the same” narrative that has held course for the year. Bond returns were positive as interest rates ended the quarter little changed.

It was a good quarter for both stocks and bonds, adding to the solid returns of the first quarter. Numerous equity indices ended the quarter at or near record highs, in spite of a relatively flat month of June. Stocks, broadly speaking, have now posted seven consecutive quarters of positive returns.

A Strong Start:

The momentum from last quarter carried into the New Year as the broad based equity averages completed their sixth straight quarter of positive returns. Investors’ attention was pulled between growing uncertainty coming out of Washington and more reassuring data about global economic growth. The quarter ended with confidence still intact, but the strength behind this year’s gains reflected a more circumspect view of the cyclical reflation trade that initially drove stocks higher.

Game Changer:

Nobody saw this coming, but in the collective wisdom and unemotional ways of the market, it didn’t take long to comprehend that this was monumental. The combination of a highly improbable election outcome with such wide-ranging policy consequences was, and is still, startling.  We’re sure there are parallels somewhere in modern history, but they elude us at the moment.