Second Quarter Recap – Skeptical Optimism

And just like that, we have volatility once again.

The first half of 2018 has had its ups (the best January on record for US Stocks) and downs (two separate -10% movements for US Stocks). The general tone of most investment circles seems to now be “Skeptical Optimism” for the short and mid term performance of risk assets.

The detailed report below highlights many important developments in financial markets over the last three months. Here are a few observations we’d like to point out:

  • The worst performing asset class in Q1 2018 was real estate (-7.43%). Conversely, this was the best performing asset class in Q2 2018 (+9.99%). This is a great lesson in not abandoning a position due to short term performance and also rebalancing and tax-loss harvesting after a decline. 
  • US Stocks (+3.89%) were anti-correlated to International (-0.75%) and Emerging Markets Stocks (-7.96%) in Q2 2018. Traditionally, stocks around the globe are often positively correlated with one another. However, as the dollar has strengthened and fears of trade war weighs on global markets, some divergence in price behavior has occurred. Our global focus does not change in light of these developments. We believe the pursuit of investment returns over the next 10,15, and 20 years must contain exposure to global markets.
  • Almost all global currencies depreciated against the US Dollar in Q2. This is consistent with the continued strength shown in the US economy and the gradual tightening of monetary policy by the US Federal Reserve.

We hope you enjoy this report. Please feel free to pass it along and don’t hesitate to ask any questions you may have.

Link: Q2 2018 Review

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