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Is the Volatility Over? The BIG Picture:

Is the Volatility Over? The BIG Picture:

Matt Ristuccia, MBA, CFA

Matt Ristuccia, MBA, CFA

Matt is Co-Chief Investment Officer

  • We are likely in a cyclical (short-term) bear market within a long-term (secular) bull market in stocks:
  • 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):
  • But Didn’t Markets Peak in October? No!  Most markets peaked in January of 2018.  That is a full year of bear markets for most indices!
  • A Retest: It would also be in line with history to see markets retest lows before the start a cyclical bull.
  • History rhymes but does not repeat: We have had one of the longest expansions in history, which gives pause to the call that the next bull market will be as strong as the average.
  • 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.
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