THE RETURN TO NORMAL

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With the opening this morning, the S&P 500, and most other major equity market indexes, entered correction territory (defined as a 10% pullback), ending one of the longest unabated market advances in recent history. Defined by its lack of volatility, global equity strength, and stubbornly low fixed income yields, 2017 was an abnormal year and one that we communicated was unlikely to repeat in 2018. In our recently released Outlook we stated the following: “where we think 2018 will differ dramatically from 2017 is that the volatility of returns will accelerate – with inflation and interest rate volatility being the culprits.” While we were accurate in the catalyst, we certainly did not know when or how quickly interest rates would begin to re-price global growth and the associated inflation tendencies.