• U.S. economic growth remains resilient nearly 10 years into the current economic expansion. Yet macro risks have gradually increased throughout the past year, including slowing economic and earnings growth, an uncertain path forward for the Fed and ongoing U.S.–China trade tensions.
  • Much of this year’s stock market rebound – the S&P 500 is up more than 10% YTD – has come as a result of the Fed’s decidedly accommodative turn beginning in late December.1
  • Looking longer term, however, it becomes clear that stock market activity has been reflecting the increasingly uncertain macro environment. U.S. stocks are up a healthy 6.1% in the 14-month period since January 2018.1 However, stocks are down approximately 4% in the five-month period since October 2018.1
  • Following a year of very little market volatility, volatility spiked starting in January 2018 and became exaggerated late in the year as investors focused once again on macro-level risks we see in today’s economy.2 As the chart highlights, daily movements of 1% or more have become more common since January 2018.2
  • Against this backdrop, investors may be well served by preparing their portfolios for an environment of higher volatility to continue for the foreseeable future.

1 S&P 500 Index.
2 Macrobond, FS Investments, as of March 7, 2019.

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