Investors have now lived through several weeks of heightened market volatility, driven primarily by a combination of disappointing economic data and erratic policymaking. As we’ll point out in this piece, the amount of market churn – especially intraday – has been unusually high while the peak-to-trough declines in most major indexes have not…at least, not yet.
Listen in as the investment team discusses the source of recent market volatility, the potential duration and depth of the correction, and how investors can take advantage.
In many ways, investors are facing a similar harsh reality of change today, as they confront how different the world, markets, and policy priorities are in 2025 than they were in, say, 2017.
Thursday and Friday saw the beginnings of an unwind of the ultra-dominant U.S. large cap momentum trade (think of the momentum factor as the Newton’s First Law factor, “an object in motion stays in motion”, with momentum capturing the dynamic that if a stock has been performing well it will continue to perform well).
It’s never fun to write about disappointment on Valentine’s Day, but Pat Benatar would agree that this week’s inflation data was more “love taker” than “dream maker”.
It would be wonderful to live in the cozy world of only-happy Surprise Surprise, but the reality in 2025 is likely to be far more balanced between potential positive and negative surprises coming out of DC.
While Tech stocks came close to making a 10% correction last week, many of the sectors that lagged last year (yes, even international stocks) were among the leaders. With growth, led by personal consumption and a strong labor market, still solid heading into 2025, investors may be remembering the lead single from U2’s 1987 classic, The Joshua Tree, as they ask whether they can live “With or Without” the AI trade.
Overall, we do not see economic growth giving the Fed The Reason to cut rates in the near term, with the U.S. economy exhibiting much more resilience to short term interest rates this cycle. But given the wild cards of President Trump’s second term and the funding challenges of the Treasury, we expect to see continued jawboning around a desired path forward for Fed policy, even if growth remains resilient.
Hear the team’s insights into the economy, key policy trends, and market dynamics as they explored upcoming challenges and opportunities.
One of the many incisive lessons from Charles Dicken’s Great Expectations is how quickly a new environment can alter our perceptions and make us forget from where we came.
Just like young Pip who forgets his humble roots and comes to demand great things from his London high society life, only to be disappointed, today’s investors and forecasters have become accustomed to a high return, low volatility, upside-surprise-driven macro and market environment.