VIX is back, be aware of the normalcy bias in 2017 .
Global equities roared out of the gate in January, notching their best start to a new year since 1994. The price of oil made an even larger jump than equities, reaching its highest price since 2014, while the U.S. dollar endured its largest monthly decline in nearly two years. Even though bond-market inflation expectations have risen to a three-year high, the Fed kept its overnight interest rate unchanged at its January meeting.
In this issue: Equity market volatility exhibits an inverse relationship with stock/bond correlation. This is a benefit to managed risk funds; As a result of ongoing low volatility, managed risk funds have generally implemented their respective maximum equity allocations for most of 2017; and market-based measures.
After stumbling out of the gate, a 2.5% rally in the second half of April left the broad-market S&P 1500 1% higher on the month.
Factors ranging from China’s evolving economy to the rise of nationalism combined to make 2016 a year that will not be quickly forgotten.
Donald Trump’s largely unexpected victory of the U.S. presidential election echoed the Brexit vote of just six months prior, reinforcing an ongoing fundamental shift in political currents and capital markets around the globe.
The S&P 1500 notched its worst monthly return since January as investors looked ahead to the presidential election and the Fed’s last meeting in 2016.
The S&P 1500 capped its fourth consecutive quarter of positive returns (and its 26th out of the last 30), as volatility reverted back up, closer to historical levels.
