After an abnormally calm and placid 2017 in the global equity markets, a higher and more normal level of volatility has resurfaced in 2018. The year got off to a good start as the momentum from tax cuts pushed U.S. stocks higher by 8% in January. Investor focus shifted in early February to an uptick in inflation, a steady rise in interest rates and talk of tariffs and trade wars. Stock markets corrected by about 10% in February, retested those lows in March and have gone sideways in recent weeks.

Stock prices rose sharply during 2017 in a remarkably coordinated rally around the globe. Even for the most optimistic forecaster, the sheer magnitude of the surge and its unusually smooth trajectory probably came as unexpected, but welcome, surprises. Most notably, 2017 enjoyed the unprecedented outcomes of positive returns in each of the 12 months and no decline greater than -3% from a prior high.

Even as the current economic expansion and bull market continue their remarkable run, investors are increasingly wary of rising valuations, geopolitical instability and potential policy missteps. Investors are also mindful of monetary headwinds as the Fed continues to raise rates and begins to trim its balance sheet.

The current economic expansion in the U.S. is beginning to approach longevity that has rarely been seen in prior cycles. This economic cycle, which began in July 2009, is already the second-longest expansion on record at 96 months. It has been a remarkable recovery … in many different ways beyond its sheer chronological age. One of its most striking traits has been the prevailing conundrum of low interest rates – at such a late stage of the economic cycle.

Global stocks continued to perform well in the first quarter of 2017. The post-election momentum in the stock market persisted into the post-inauguration phase as well. U.S. stocks rose by about 6% and foreign stocks gained even more. Large company stocks performed better than smaller ones and stocks with more sustainable growth attributes outperformed the more economically sensitive value stocks. Bonds were up by about 1% as interest rates eased back from their highs of early 2017.

What a difference a year makes! At this time in 2016, markets were collapsing under the weight of a Clatter of Concerns…Crude, Commodities, Currency, China, Credit and Central bank divergence. Those fears have since dissipated as we enter a new year and perhaps a new phase of renewed global economic activity.

The United States elected Republican nominee Donald J. Trump as its 45th President on November 8th. Marking a remarkably peaceful transition of power, the Republicans now add the White House to their incumbent leadership positions in the Senate and the Congress, and an anticipated conservative majority on the Supreme Court, for a rare clean sweep. Indeed, the last time the Republican Party enjoyed such power for an entire term was almost a hundred years ago in the 1920s.

We live in interesting, and it seems increasingly uncertain, times. The world seems less predictable these days as we grapple with geopolitical, social and economic tensions in the midst of a rising wave of populism against the establishment. Quite paradoxically, markets appear to have stabilized in recent months. Investors are now adjusting to an uneasy equilibrium where lack of growth leads to low interest rates, which in turn supports high valuations—an outcome which then appears to be at odds with low growth!

The United Kingdom voted to “Leave” the European Union (EU) in a historic referendum on June 23. The 51.9% vote to Leave was influenced by four primary factors: pride of sovereignty and desire for autonomy, flexibility in negotiating new bilateral trade relationships, better economic use of funds contributed to the EU and greater control of borders and immigration.

The first quarter of 2016 was virtually a tale of two halves as markets went on a roller-coaster ride. The growth scare triggered by China’s surprise currency devaluation last summer intensified at the beginning of the year. Commodity prices continued to tumble, oil went below $30 per barrel, credit spreads widened to recessionary levels and fears of widespread contagion began to dominate the markets. Growth expectations fell around the globe, stock prices declined by -12 to -18%, the 10-year U.S. Treasury bond yield dipped below 1.55%, the U.S. dollar climbed higher and oil hit a low of $26 per barrel in the midst of the market mayhem.