Markets rose into the new year upon approval of sweeping tax reform in the U.S. Fortune turned in late January, though. Where investors once sought stronger inflation, it seems fears of too much of it saw perspectives flip. Compounding caution, increasingly contentious and sometimes erratic gestures from administrations around the globe left strategists warning of rising geopolitical tensions. Though the two forces had mixed effects on domestic bond prices, pressures from rising rates prevailed and fixed income returns were broadly negative in the quarter. Both trends lifted investor uncertainty to levels not seen in a few years, reminding many of the saw—past performance is not guaranteed—and leaving most segments of the equity universe in the red. Zooming out, equity investors may still find content in year-over-year gains easily in the double-digits, with now-higher yields potentially boosting bond returns going forward.

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With interest in and media coverage of investible markets so expansive, market volatility has become much more of a shared experience. Actual exposure to that volatility need not be. The design of our models acknowledges as much, with the range of exposures to investment risk they present offering flexibility to address specific needs of unique investors. While we utilize fixed income holdings to offset equity market risk, bonds are not without risks of their own. Still, the bond segments in which we invest generally are more stable than equity investments, offering the tools we seek to balance desired return with commensurate risk.

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More than a few folks are worried that interest rates are on the rise. Leaving aside the fact that rising rates generally are a signal of an improving economy, the concern may be warranted given the fact that bond prices generally fall as interest rates rise. Here as in so many other facets of investments, though, the perspective of time matters. As yields increase, we look to the potential for income from bonds to offset capital losses (as bond prices fall), a feature facilitated by the now higher yields on those bonds. Those concerned about the medium-term effects of higher rates on the bond portions of their portfolios may find some solace in this month’s review of past rising-rate periods.

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One of the several risk-oriented messages we hope has resonated with readers of our commentaries over the last year is that we have maintained a strong belief that the absence of volatility in equity markets did not in any way diminish the potential for volatility. Today’s turn of trend is a forceful reminder that markets can and likely will turn negative at times. These shifts can be abrupt, and they may arrive with no obvious catalysts. They may prove ephemeral or may herald a longer-term downtrend. Today’s result was quick to form, and we’ve read no singular explanation for its occasion. Unsettling for sure, it still was far from the worst seen in history. And though one may wish to turn and run for fear of more to come, it may not portend an extended decline. Longer-term goals perhaps better served, the plunge represents an opportunity for investors to revisit comfort with interim market losses via a discussion with a trusted advisor.

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With the equity market plunge the talk of the trade over the first week in February, pundits offered a diversity of explanations as to why stock prices had turned so suddenly and a range of expectations for what’s to come. Though many pointed to the surge in interest rates as a reason for the downdraft in equities, less discussed was the impact on the rate shifts to fixed income investors. Though the sharp decline on February 5 led to a flight to relative safety in bonds, we acknowledge that the recent spike in yields still has negatively impacted fixed income returns in the near term. Even so, we continue to welcome higher rates as both a signal of a more properly functioning economy and as means for more fruitful long-terms returns for bond investors.

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To call the past half-decade of domestic equity markets gains robust is assuredly an understatement, with such a strong and even-tempered march higher rare to uniqueness in history. The centers of investor attention, global central banks maintain steady and resolute control over modest shifts in monetary policy, while global macroeconomic dynamics remain firmly on the side of positive. Investors seem devoid of undue stress that errors in judgement or errant drifts from trend will disrupt the present lack of tension. Still, with caution sourced from history fraught with storms succeeded by such calm, we’ll note that the future holds equivalent potential to delight and disappoint. While we welcome a new year already off to a strong start, we will remain vigilant of shifts relevant to our portfolio positioning and offer the friendly reminder that peace and patience with market exposure is unique to the individual and well-worth regular revisits with trusted advisors.

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Market peaks may seem particularly frightening. Like the crest of a roller coaster, they may incite panicked concern that the only course from here is down. Unlike roller coasters, though, such anxiety is unattached from observable truth. While we can see the coaster track, there is no rule in investing that determines future trajectories. Nonetheless, we may find comfort in market history. Though the answers to “by how much?” and “for how long?” only may be determined in hindsight, we may use market history to show probabilities of future outcomes given starting circumstances. For those wary of the fact that December 2017 marked yet another peak for the S&P 500 Index, this month we look to provide detail as to what the future held for past market peaks in hopes that these data will prove comforting support for a chosen level of market exposure.

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As the year comes to a close, prognostications for 2018 already are filling up our inboxes. We hope to spare readers another choice of whom to believe. Any meaningfully specific views we might share are no more likely to come true than the various others we’ll read over the next few weeks. The question on many minds, of course, is, “how will my portfolios perform next year?” We can only be abundantly honest and suggest that it’s impossible to know in absolute terms. Instead, we think a better idea would be to establish a level of ease with a range of market outcomes and align portfolios such that they might fall within that zone of comfort. Though the if-we-only-had’s are somewhat unavoidable, acknowledging potential fears and regrets in advance may leave us better off in the longer run and more relaxed in between.

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To date, the U.S. equity market has recovered from all major and minor downturns. Even so, a time will come again when we are in the middle of an extended downturn. That presents a conundrum: How do we prepare otherwise risk-tolerant individuals to remain in markets that have treated them badly? We think the answer includes regular reminders about past market volatility as well as the illustration of the idea that the achievement of long-term gains may well require enduring stretches of heightened market volatility and extended declines. In this month’s commentary, we seek to revisit the worst of what we’ve experienced over the past few decades. Our intention is to remind readers about past market tumult and those subsequent recoveries. The upshot is that our investment time horizon is an important consideration when estimating our tolerance for market risk.

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With few grand shifts in themes over the past three months, global investible markets provided reasonably generous returns for the inherent risks they present. Solid gains seen across the board, broad-market investors may have been pleased with the results, driven by coordinated global macroeconomic growth and durable corporate fundamental strength. It seems many continue to believe great risks lie just around the corner, and that markets will turn quickly and furiously once those risks come into view. With more than a few major market meltdowns in our mental history books, we know there are reasons to be both optimistic and vigilant. But, such always is the case, in our view. That thinking driving our approach to investment management, we continue to recommend careful review of tolerance for market risk. The intention of such reviews is to provide a source of confidence that, whatever path markets will take, we may participate in a manner appropriate to our individual goals for growth and appetites for volatility.

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