Is the Volatility Over? The BIG Picture:
- Birds Eye View: What we have seen in equities over the last year is in line with historical bear markets within secular bull markets in terms of time and percent loss (Source: Ned Davis Research):
- A Retest: It would also be in line with history to see markets retest lows before the start a cyclical bull.
- When to buy? Drawdowns greater than 20%-25% usually include either high valuations/major asset bubbles, an aggressive Fed, and/or an oil shock. None of that exists today. Therefore, if we retest lows set in December we are likely buyers.
- Risks: Main risk today is greater than expected deterioration in the economy due to higher than average geopolitical risk and potential policy errors.