Volatility was strangely absent from equity markets throughout most
of 2017. But the first quarter of 2018 provided a healthy reminder that
volatility didn’t disappear. Global equity markets saw sudden and sharp
drops in late January and early February, only to partially recover by the
end of March. Large-cap stocks in the S&P 500 Index lost 0.8% in the first
quarter. Stocks of smaller companies, represented by the S&P SmallCap
600 Index, managed to finish with a small gain of +0.6% despite the
While economic news was mostly good, international stock markets also experienced negative returns and significantly higher volatility. The MSCI Europe, Australasia, and Far East (EAFE) Index lost 1.5% for the first quarter.
Bonds also had a tough quarter with interest rates rising for much of it.
The Barclays U.S. Aggregate Bond Index lost 1.5% over the first three
months of 2018. The Federal Reserve seems increasingly focused on
signs of modestly higher inflation as the economy continues to pick up
steam in the U.S. and abroad.
The Financial Engines perspective.
It was easy to be complacent for much of the last year. Markets mostly
went up, and volatility was near historic lows. But of course, this isn’t how
markets normally behave. The first quarter provided a stark reminder
that risk in financial markets is never far away. However, risk also
creates opportunity, and achieving an appropriate balance of risk and
opportunity is what investing is all about.
At Financial Engines, we structure your portfolio to seek expected returns
while lessening potential downside. As market conditions shift and evolve,
we update your investment allocation to help keep you on track.
Call one of our advisors. We’re here to help.
© 2018 Financial Engines. All rights reserved. This publication is for informational purposes only and does not constitute investment advice or an offer to buy or sell any security. Future market movements may differ significantly from the expectations expressed herein, and past performance is no guarantee of future results. Financial Engines assumes no liability in connection with the use of the information and makes no warranties as to accuracy or completeness. Future results are not guaranteed by any party. Financial Engines® is a trademark of Financial Engines, Inc. All other intellectual property belongs to their respective owners. Index data is derived from information provided by Standard and Poor’s, Barclays Indices, and MSCI. The S&P 500 index and the S&P SmallCap 600 Index are proprietary to and are calculated, distributed and marketed by S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC), its affiliates and/or its licensors and has been licensed for use. S&P®, S&P 500® and S&P SmallCap 600®, among other famous marks, are registered trademarks of Standard & Poor’s Financial Services LLC, and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. © 2018 S&P Dow Jones Indices LLC, its affiliates and/or its licensors. All rights reserved. Source: MSCI. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used to create any financial instruments or products or any indices. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.