“It was a beautiful day, the sun beat down
I had the radio on, I was drivin'
Trees flew by, me and Del were singin' ‘Little Runaway’
I was flyin'…

I felt so good like anything was possible
I hit cruise control and rubbed my eyes
The last three days the rain was unstoppable
It was always cold, no sunshine…

I rolled on as the sky grew dark
I put the pedal down to make some time
There's something good waitin' down this road
I'm pickin' up whatever's mine

Yeah runnin' down a dream
That never would come to me
Workin' on a mystery, goin' wherever it leads
Runnin' down a dream”

(“Runnin’ Down a Dream”, Performed by Tom Petty)


The “Goldilocks” regime we described last month remains solidly in place – global economic growth (especially in manufacturing), strong corporate earnings and revenues, raging equity markets, low interest rates, and an almost frightening level of market complacency. As measured by the VIX, market volatility has not traded above 20 since November of 2016 (coinciding with the election of Donald Trump), and currently trades just above 10 (in comparison to an historical average in the high teens to low twenties).

Keep in mind that, since November of 2016, we’ve witnessed the Fed raise rates three times (and strongly suggest a fourth in December), announce an implicit monetary tightening policy as it looks to unwind its balance sheet, Trump’s unexpected election, three hurricanes, multiple acts of horrific global terror, an independence vote in Catalonia that could reignite nationalist sentiment across Europe, and the transfer (well, more like retention) of national leadership in China. But nothing seems capable of knocking the markets off their steady climb upward.

As we wrote last month, nothing is ever completely stable in a world where Donald Trump is President, but even he seems to be taking the safe path with his announcement of selecting long-time Fed Governor Jerome Powell to replace Janet Yellen as Fed Chair.

The markets would probably like to have seen Yellen reappointed, as Fed policy under her leadership has been positive (to say the least) for the markets. But Powell is seen as someone likely to continue the “low and slow” direction of the Yellen Fed.