As we noted in our recent Year in Review newsletter, we expected volatility to increase in 2018, and here in the early days of February 2018 we see that volatility increasing as the S&P 500 has declined more than 5% in the last two days. Many headlines say that the recent decline is due to increased worries over inflation, and how the Federal Reserve will react to unexpected inflation news. While that may be a part of the rationale for there being more sellers than buyers, we tend to think this is a rather weak argument. Although the two main inflation indicators the Federal Reserve uses have been accelerating in recent months, they are not indicating a rapid return of inflation. It seems other reasons exist for the recent downturn. Read more.
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