The equity market action over the past year is truly historic on many levels. It is important to recognize how unique this time frame has been and that a more volatile 2018 may be likely, and quite frankly normal. This week we will highlight some of the amazing streaks that have taken place, list a few of the reasons why we should anticipate a pickup in volatility, and explain how any possible weakness can provide suitable investors with an opportunity in diversified portfolios.

How Rare Have Things Been?

Below are five S&P 500 Index observations to illustrate just how unique the recent market activity has been:

1. The

The 10-year Treasury yield has seen a strong move higher since September 2017, and recently surpassed its March 2017 post-election highs. A combination of higher global rates (driven by more hawkish central bank expectations), rising growth expectations due to tax reform, and an increase in inflation expectations have been the major forces driving rates higher over the past several months.

Rising rates have hurt bond prices over this period, with the Bloomberg Barclays U.S. Aggregate Treasury Index seeing a loss of 2.3% since the 10-year Treasury yield bottomed on September 7, 2017. The broader bond market has also been affected,

Beige Book Suggests Continued Moderate Economic Growth

The latest edition of the Federal Reserve’s (Fed) Beige Book, released Wednesday, January 17, 2018, continued to deliver a positive view of the U.S. economy. The Beige Book is a qualitative assessment of the domestic economy and each of the 12 Fed districts individually. The report is prepared eight times per year, ahead of each Federal Open Market Committee (FOMC) meeting — the next of which is set to take place from January 31 to February 1, 2018. We believe that the Beige Book is best interpreted by measuring how key words change over time. The qualitative inputs for the

It’s early in the season, but with about 50 companies having reported fourth quarter results, S&P 500 Index earnings are tracking a 12% year-over-year increase [Figure 1]. A solid 79% of the companies have bested earnings estimates, while 87% have topped revenue targets, both well above recent and long-term averages. In this week’s commentary, we preview fourth quarter earnings season and reiterate our optimism for corporate profits in 2018.

Six Reasons for Optimism

The S&P 500 has exceeded quarterly earnings expectations for 34 straight quarters and we see no reason why the fourth quarter of