Volatility Finally Returns to the Markets

After years of historically low volatility throughout the stock markets, the start to 2018 has finally shown us a more normal amount of "bumpiness".  U.S. markets were down slightly on the quarter, as inflation has begun to creep up and the Federal Reserve continues to raise interest rates in response.   

As usual, I'm keeping a close eye on the messaging coming from the Fed.  The first quarter gave us a new Fed chairman in Jerome Powell, who took over for Janet Yellen.  Whereas previous regime changes have come with a great degree of change in stance and communication styles, Powell seems to be very similar to Yellen.  Since taking the position he's been relatively open on his stance, thoughts about rate trajectories, and metrics he and the other governors are looking at. 

All in all, the transition itself probably won't have a big effect on investors and the markets.  However, with economic growth still trending up & inflation creeping into the picture, it's not hard to see short term rates continue to rise.  

There are, of course, many things that could derail the economy and cause the fed to pull back from future increases (think international trade war).  But rather than examine the possibilities and outlook for various asset classes, I'll instead share a broad market review from Dimensional Fund Advisors: