Risk Assets Continue to Climb as Volatility Disappears

• Risk assets continued to move higher on the back of strong global economic activity. Investor sentiment rose as market participants weighed the potential benefits from U.S. tax reform. The VIX remained at a historically low level over the quarter. The lack of volatility was consistent throughout the year, making 2017 one of the least volatile years in the stock market’s history.
• U.S. equities posted their ninth consecutive year of gains, which is tied for the longest stretch without a down year. Large-cap stocks outperformed small-caps on the back of a weaker U.S. dollar and strong global growth. International equities performed even better, outpacing the S&P 500 for the first time since 2012.
• Core fixed income was neutral to slightly negative over the quarter as interest rates moved higher and credit spreads stayed rangebound. The FOMC hiked interest rates an additional 25 basis points in December, however, the move was expected. High yield and EM debt generated positive returns from income, however the lack of volatility resulted in little price movement. Latin American bonds (i.e. Brazil) finished the year strong as investors became more comfortable with higher quality emerging markets.
• Energy-related assets moved higher over the quarter as oil approached $60 per barrel. Sustained OPEC production cuts, declining inventories, and steady demand resulted in gradual price appreciation.

To view the Fourth Quarter Reports, click on the links below:

• 4Q17 Global Positioning Statement™
• 4Q17 Global Equity Review
• 4Q17 Taxable Fixed Income Review
• 4Q17 Tax Exempt Fixed Income Review
• 4Q17 Real Assets Review
• 4Q17 Private Equity Review