Well, it was bound to happen: a negative quarter.  We’ve all been told that markets just don’t go up, up, up!  And after January roared higher, markets pulled back in February/March and most indexes finished flat to slightly lower by end of the quarter.  The end results weren’t necessarily bad, but it never feels good to experience a down trend.

I found the graphic above to be appropriate – it’s helps visualize our feelings in the ups and downs of the market. To put in perspective, this was our first negative quarter since 2015, and prior to that, 2012.  It was also the most volatile quarter that we’ve had in years, highlighted by 23 days where the market moved in 1% (either direction) as well as a 10% pullback from the January highs.  That said, here’s how some of the major metrics fared in Q1:

Index	1st Quarter	YTD
S&P 500 Large Cap Index	-1.22%	-1.22%
S&P Small Cap 600 Index	0.24%	0.24%
S&P Developed International Index	-1.81%	-1.81%
S&P U.S. Agg Bond Index (total return)	-1.27%	-1.27%
S&P Municipal Bond Index (total return)	-.92%	-.92%
Dow Jones All REIT Index	-7.57%	-7.57%
Dow Jones Commodity Index	0.91%	0.91%
Source: Dow Jones, data as/of 3-29-2018 (doesn’t include dividends unless noted) Click here to view a comprehensive list of index returns.

Much of the industry consensus is that inflationary pressures are increasingly more prevalent, which would theoretically cause interest rates to increase.  Rising rates, in turn, are supposed to cool down an otherwise hot market.  Markets don’t like this kind of uncertainty, so this has caused investor angst …and contributed to greater volatility in the market.  So far in 2018, we’ve seen more daily moves in the S&P500 of 3% and 4% than we saw all of last year.  But on a percentage basis, if we compare that to the biggest moves of the index in the past 80 years or so, none of them even crack the top 20 of all time greatest daily moves.  In recent history, 2008 was a year that we had several daily moves in the S&P 500 of 7-to-10%!  Not to say that we won’t see that again, but we haven’t seen that kind of movement thus far in 2018.

It’s worth noting that although volatility scares people, volatility itself isn’t necessarily bad particularly if economic fundamentals remain sound. Regulation and monetary policy are very much positives, as is economic growth and the healthy employment picture. Global markets are poised to have a nice year, but the recent tariff announcements (and potential trade war) could put a wrinkle in those plans.  So there are some “wild cards” and all things may not be perfect, but…there is still reason to believe that the economy is still in good shape.  I often remind investors that volatility is normal (and even healthy!) and the ride can get bumpy at times, so keep those seat belts fastened.  Compared to the smooth ride of 2017, anything will feel more bumpy!

Needless to say as investors look at their quarterly statements, they will probably notice a slight pullback in their balances.  As much as we know that market pullbacks are part of the game, it doesn’t feel good to experience it.  Even though I fully understand and preach this, I totally “feel the pain” right along with you.  If for no other reason, my income is dependent upon how well account values grow…i.e. if your account balances drop, so does my income!  Imagine doing the same (actually more!) work over the past few months and getting paid less – not many would sign up for that gig – ha!  But it comes with the territory and nature of the business that I am in, so I choose to take the good with the bad.  I have confidence that patience, persistence, and discipline will always pay off in the long term.

Brandon

Disclaimer: This information contains forward-looking statements about various economic trends and strategies. You are cautioned that such forward-looking statements are subject to significant business, economic and competitive uncertainties and actual results could be materially different. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time and are the opinion of the advisor. Data comes from the following sources: Census Bureau, Bureau of Labor Statistics, Bureau of Economic Analysis, the Federal Reserve Board, and Haver Analytics. Data is taken from sources generally believed to be reliable but no guarantee is given to its accuracy.