The first quarter of 2018 was remarkable in several ways. We saw record highs in equity markets, but also a fierce resurgence in volatility. To some degree, the first quarter was a Jekyll and Hyde type of period. The first half of the quarter was characterized by a low volatility, momentum driven, continuation of the themes that carried 2017.
There is an old saying on Wall Street that the markets climb a “Wall of Worry.” The past quarter and year certainly had several concerns, but the markets continued higher and finished the year at all-time highs.
The small- and micro-cap markets started the third quarter with a modest correction, but finished the quarter with a monster gain in September. All equity markets produced positive results in the third quarter, but the real stars were smaller stocks.
The second quarter performance for the stock market was very much like the first quarter performance. Large stocks performed well and growth stocks outperformed value stocks. The table below details the performance for large stocks and small stocks for both the second quarter and year-to-date.
The first quarter of 2017 was an interesting quarter in that performance was a reversal of 2016 and particularly the fourth quarter of last year.
The fourth quarter and 2016 brought several surprises to investors. Fortunately, many of those surprises were positive. The first surprise came earlier last year when the British decided to exit the Euro (Brexit). While initial market reaction was negative, the proceeding weeks that followed was a strong rally for equity investors around the world.