What to make of last quarter’s market volatility

Recent market volatility is a reminder that there are risks to investing. Given that markets has risen over the past 10 years without a major pullback, a downturn is a normal and healthy part of market movements. Without corrections, markets can become overvalued and bubbles can form. Concerns about an economic recession, however, are still low; we continue to see strong fundamentals and a generally sound economy. Economic data remains strong, including consumer confidence, retail spending, and employment trends. And although the Fed has raised interest rates, they are still far below levels that might choke off economic growth. All of this begs the question: if everything is fine, why did markets drop so suddenly? Several fear factors have come together to spook investors, including trade with China, uncertainty in Washington, and the Federal Reserve’s interest rate policy. These factors may continue to cause fluctuations in the short term, but it’s important to keep in mind that these do not reflect the fundamentals of corporate America or the economy. Another factor likely contributing to rapid market decline is that much of the trading these days is done through hedge funds, ETFs, and automated trading. One manager noted that some 150