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Solaris Asset Management Market Commentary March 2018

13 April 2018

The seemingly unshakable, quiescent stock market finally turned jittery during the first quarter of 2018. After reaching a peak in late January, global markets became volatile and lost ground over the next two months. The sudden downturn was precipitated by technical factors, including sizeable de-leveraging by risk-parity traders. Post-January, markets fell on prospects of higher inflation, rising interest rates, heightened political uncertainty, potential tariff and trade policy missteps, and possible regulatory actions on technology companies. These issues make up a “wall of worry” that, heretofore, has been routinely scaled by investors. While many worrisome issues have been present for some time, the decline in the S&P 500 this quarter marks only its second down quarter in five years. US Treasuries provided no safe haven as yields rose and their performance was negative. Globally, credit spreads widened, leading corporate bonds to underperform sovereigns. TIPs modestly outperformed their nominal counterparts. The US dollar fell particularly against the Euro, British sterling and the Japanese yen. In the face of rising bond yields, real assets such as REITs and MLPs declined sharply.

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