Milliman FRM Market Commentary: April 2018

Stocks settle in as interest rate questions loom. In this month’s commentary, Milliman’s Joe Becker addresses the following:

• After two consecutive months of market tumult (comparatively speaking) and negative returns, the S&P 500 in April exhibited greater calm and eked out a positive return.
• Volatility was lower in April than it was in March and closer to its five-year average across each of the major segments of the global equity market.
• Unlike 2017, markets in post-January 2018 have been much less decisive. On the one hand, strong global economic growth and pro-growth tax cuts are reasons for optimism. On the other, trade-tariff wars and rising interest rates are undermining investor confidence about potential future earnings growth.
• The U.S. dollar broke upward out of its three-month range, creating a headwind and potentially higher volatility for non-U.S. equities.
• Correlations between major equity market segments were little changed in April. The correlation between U.S. stocks and bonds, however, edged higher as rising interest rates and widening credit spreads weighed on bond market returns.

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