Volatility returned in size to start the new year. It wasn’t unexpected. We titled our annual Outlook piece Mean Reversion. It is the backbone of our 2018 investment strategy. The new year began with the Stock Market seriously extended. Without any sort of correction in 2017, stocks precipitously propelled higher with some reckless abandon. There was no healthy back and filling. There was no breather. When that happens, the inevitable correction tends to be larger, quicker and more violent on the way down. There were simply more excesses to correct. The Market tends to get ahead of itself. That’s where corrections serve a purpose. That’s what has been taking place in February and March. A significant streak was broken. Q1 2018 was the first quarter in ten that was a decliner. The S&P 500 had been up in nine consecutive quarters. The last decline was Q3 of 2015. It has been a remarkable run. We see the correction continuing a little longer. It’s normal and it’s healthy. It’s not much fun though.
To read the complete Bedell Frazier Spring Newsletter, please click here.