First Quarter 2018 In Review

V is for Volatility

Spring has arrived! Unfortunately, volatility is back with a vengeance, too.

It's difficult to believe the U.S. bull market is more than nine (!) years old. Nine years ago my wife and I hadn't even welcomed our second child into the world. 

What's causing the volatility? Worries about inflation, the threat of a trade war with China, privacy concerns related to the mismanagement of consumer data by big tech companies, daily tweets from He-Who-Must-Not-Be-Named, and concerns that the actor playing young Han Solo doesn't really look or sound like everyone's favorite smuggler.

Okay, maybe that last one's a stretch. Let's look at the numbers.

Q1 2018 Numbers

Remember all the way back in 2017 when financial markets were posting strong returns? Sadly, that hasn't carried over into 2018. The most commonly used benchmark, the S&P 500 Index, posted a decline of 1.17%.

The average diversified U.S. stock fund, which is a better measure of how we invest than the S&P 500 by itself, lost 0.4%. Investors, wary of, among other things, a long bull market and a potential trade war with China, are exercising caution, with nearly $53 billion flowing out of stock funds during the quarter.

Losses weren't confined to domestic markets: The average diversified international stock fund declined by 0.6% in the first quarter. In a sign of investors' preference for foreign markets, $80 billion flowed into international stock funds during the quarter.

The average intermediate-term bond fund lost 1.4% during the first quarter. Nearly $75 billion flowed into bond funds during the quarter, likely due to concerns about volatility in stocks.

Expectations For The Second Quarter And Beyond

When it comes to financial markets and investments, I honestly don't know what to expect. I can make educated guesses, but anyone who tells you they know what is going to happen tomorrow, next month, or next year is lying.

The markets have come a long way since March of 2009, which has been wonderful for investors. I know there will be a correction at some point, but I cannot predict when it will happen or what will cause it.

In the meantime, you should focus on what you can control. Make a financial plan that's right for your goals and financial situation. And stick to it.

Listening / Reading / Watching

Here's what has my attention right now:

  • The Gone World by Tom Sweterlitsch. What if the United States managed to reverse engineer extremely advanced technology? And then started exploring the galaxy? And also mastered time travel? This book manages to answer all of those questions while keeping the focus on a murder investigation. Did I mention there are also alternate universes? It's great fun and I highly recommend it.
  • The Stone Sky by N.K. Jemisin. I don't even know how to describe this without spoiling anything. This is book three in a series called The Broken Earth. And you should read it. I'm sure you're thinking, "Great, another trilogy". Trust me, it's worth it. Jemisin is an amazing storyteller.