Investment Recap First Quarter 2018

The first quarter started strongly in January with market gains of 7%. Beginning in February markets experienced much higher volatility and nervousness; the quarter ended in a loss of less than 1%. Our performance was 1% below the market for the quarter, but now we are even with the slightly positive overall stock market results.
With the benefit of hindsight, we know that the dramatic fluctuations beginning six weeks ago were mostly the unwinding of “risk parity” hedges connected with bets on continued low market volatility. These transactions and “bets” are not too dissimilar to past occurrences of a “flash crash” phenomenon. The essential point is that the activity is not a fundamental economic event although it can prove to be temporarily unnerving to investors.
The message on the economy and stock fundamentals, is that revenues are expected to grow at 7% this year and reported earnings as much as 20% (given the benefit of lower tax rates). Also, we see, as we predicted, a shift in market leadership favoring small cap and value stocks. This is a necessary and healthy development which augers well for the broad market and for our relative outperformance opportunity.
We are happy to announce that Monica Alejos has joined the Winslow team as an Operations Associate. She replaces Kim Summers who left the firm to become a part-time Yoga Instructor.