Fourth Quarter 2018 Commentary After experiencing subdued market volatility in 2016 and 2017, investors were expecting much of the same in 2018. Instead we saw violate market swings that drove several sectors into bear market territory, particularly in the fourth quarter. It was a perfect storm of bad news, uncertainty, and a reset of expectations. Bad news. The Federal Reserve stayed on schedule with rate hikes last year. Their data dependent action pointed to a steady economy, low unemployment, and managed inflation. With a positive economic backdrop, the Fed is expected to stay the course toward rate normalization. However, a tighter monetary policy is bad news for Wall Street, who was rather attached to low interest rates. Even though the Fed’s action was fairly transparent, no one was happy about the punch bowl being taken away. As the 10-year Treasury note moved as high as 3.25%, we saw a shift occur away from stocks, especially the bond proxy type stocks. Uncertainty. What we know for sure is that nothing is ever certain and the market doesn’t like uncertainty. Right now, we’re faced with trade conflict, political issues in the U.S. and abroad, as well as tighter financial conditions. There are economic concerns of a slowdown in China, the Eurozone, and Japan. Trade wars, current tariffs, and slowing global growth all raise questions about the impact to production costs and demand for exports. Reset expectations. Investors are left wondering how the current state will play out. There will be a hyper focus on future earnings guidance, GDP growth, government spending, interest rate movements, trade tensions and other geopolitical issues. Stocks will continue to come under pressure when valuations become unsustainable in the current environment. The recent market sell off is a painful reminder of how quickly volatility can spike and how jagged each trading day can be. Although we know it doesn’t take a recession to derail the financial markets, our near-term outlook deems the need to prepare for a recession sooner than later. We still want to participate in potential growth, but for downside protection, we are adjusting fixed income portfolios to drive up core quality and take advantage of cash alternatives. In our equity portfolio, we are moving out of the riskiest equity positions into more a defensive stance to incorporate disciplined risk management. In addition, we encourage you to evaluate your risk tolerance and financial objectives periodically to determine if your asset allocation is in line with your current and future goals and needs. During times like these, it’s best to leverage our advisory services to help you manage your financial objectives. If there have been any changes to your financial circumstances or investment objectives, please contact us right away. We want to thank you for your continued trust and wish you the best for a Happy and Healthy New Year!