On Air with Altair: Perspective on the Start to 2018
After the calmest year on record for market volatility, the ups and downs over the last few weeks have felt jarring.
Watch our most recent video to hear our perspective on the market turbulence.
We are approximately two months into the year. Jason, what’s your perspective on the pickup in market volatility over the last few weeks?
Well, Anna, last year was one of the calmest in market history. In fact, we went almost 500 days without one 3 percent pullback. However, this year, we actually have now had a 10 percent pullback since the January high. But in fact, volatility like this is fairly normal. A typical year, even a good year for markets contains at least one pullback anywhere from 10 to 15 percent. This bout of volatility feels perhaps worse than usual, just because we’ve gone so long without it. It’s like that first 50-degree fall day, and some folks are bundled up. But you take that same 50-degree day in the spring, and those same folks are in T-shirts and shorts.
So, what’s behind this market turbulence?
Well, interest rates are still at historic lows and inflation actually remains below the Fed’s target. The recent volatility stems from the first signs in a long time that inflation shows some signs of picking up, and along with that interest rates moving higher. Which makes markets nervous, because it represents change. However, at this point, we see the trend in inflation and interest rates as a byproduct of an improving economy – not just the U.S. economy, but also globally.
So at this point, you’re not overly concerned with the higher volatility. What are you focused on?
Well, as we discuss in the most recent Altair Insight that was sent out at the end of January, one of our bigger concerns is whether the newly reshaped Fed will raise rates too far, too fast – especially considering the recent data. Now, this bout of short-term volatility in and of itself will not derail the economic momentum that we have. But an overly aggressive Fed certainly could. While we do think the market may be volatile in 2018, we are encouraged by the positive economic backdrop.
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