Market Outlook

The market has become increasingly volatile over the past several weeks as investors grapple with rising interest rates and generally heightened market valuations. However, the U.S. economy remains in good shape (strength in housing, low unemployment, wealth effect from a strong stock market in recent years). Furthermore, S&P 500 earnings have been quite strong with many companies increasing FY2018 guidance on the back of tax reform. The recent pullback in the market combined with upward revisions to earnings has resulted in a substantial decrease in the forward price/earnings multiple of the S&P 500, which makes valuations considerably more attractive.
We believe the strong backdrop and re-introduction of volatility will provide opportunities for stock pickers, particularly those with high conviction, concentrated portfolios.