Pardon My Tardiness
I apologize for the lateness of this commentary. Last week I returned from “conference week” in Texas and brought back much to ponder as well as a flu bug that’s kept me home sick for awhile. My first conference was John Mauldin’s “Strategic Investment Conference” (SIC) in Dallas followed by a sort of health symposium called “Paleo-FX” in Austin. Maybe I should find a different “health” conference next year that doesn’t get me sick?
Highest Volatility in Years
These first four months of 2016 have been the most volatile since the onset of the dot-com blow up in 2000 with huge swings in both directions. April continued the trend selling sharply early and at the end of the month sandwiched around a nice mid-month rally. The net of the month and the year-to-date swings has been just a bit over 1% appreciation in the large-cap, S&P 500 and Dow Jones Industrial indices.
The increased volatility has not been particularly surprising as the lethargic, global economic recovery is being counterbalanced by worldwide central banks keeping the monetary spigots wide open, though with seemingly less effect:
Janet Yellen: “Caution is especially warranted”
The stock market has continued its yo-yo behavior of the past couple of years as the mid-February market bottom held with the S&P 500 continuing its rally from there to get all the way back to even for 2016.
The recent market volatility continued in February with an initial sharp decline to a low on February 11 followed by a second-half of the month recovery for most major stock indexes. The net effect of the wild ride was that the S&P 500 ended the month just slightly lower for its third straight monthly decline, though not nearly of the magnitude of the sharp selloffs in December and January.
Once again I find my attention drawn to the Federal Reserve and the impact of this greatest monetary experiment in history. Back in the late 1970s, while majoring in economics at Stanford, I took a quarter of directed learning with a professor on the topic of “Money and Banking”. I’m not sure exactly why, at age 21, I found the topic interesting enough to pursue in depth.