Was This Week A ‘Healthy’ Pullback? Doesn’t Seem Like It.

With low rates and a grinding higher, low volatility environment like we saw in 2017, it was easy for investors and fund managers to get complacent. This was especially true after the exuberance in January where everything was up without any rotation in the market. Retail investing in stocks jumped as their attention turned from fledgling Bitcoin to the seemingly easy money in stocks. The low volatility trade became crowded like never before.

What could go wrong? We had foreseeable growing global growth (which usually leads to higher global rates and global synchronized tightening). We had a stock market that was called a runaway freight train in January, leading Goldman Sachs to claim risk appetite was at its highest level on record. The Fed made it clear it is raising rates, but the dollar remained weak…? Our concern a week ago was what impact higher long-term rates would have on the passive investment crowd.

Suddenly we get a spike in volatility along with higher…

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