FMA Market Update – June 2017 Edition
June 3, 2017 | John J. Klobusicky CIO, CFA®, CAIA
As we have noted in the past, markets climb a “wall of worry”, with a return premium paid to investors that is above and beyond risk free Treasury notes and dependent on how big and how many blocks are in the wall. Bull markets often end when investors no longer have any worries, and the equity risk premium is absorbed and baked into equity prices. Only 18 months ago, our wall of worry consisted of the Ukraine conflict, fragile European economies, and a Greek exit from the Eurozone; not to mention very low oil prices and the start of an earnings recession here in the U.S. Gleaning any possible market disruption today is much harder, and that should concern investors. To be sure, North Korea, an uncertain Federal Reserve path, and dashed expectations for the President’s initiatives do present risk. But by all accounts, the VIX index—shown below—is reflecting a very tranquil, worry free market.