In March 2018, global equity markets marked the ninth anniversary of the bull run and almost immediately went into a mood of increased nervousness.
Volatility, which had been absent for some time, became a distinct feature of market performance.
Despite the increased volatility and nervousness, markets continued to nudge higher over the following months, that is at least until the beginning of October.
Thereafter, the situation deteriorated markedly.
Between October 3 and Christmas Eve, the S&P 500 index in the US shed almost 20% of its value.
The final thin trading days of 2018 turned more positive, but for the year as a whole, the S&P had shed 6.6% of its value.
Relative to Europe and elsewhere, this was a good performance, largely because the US economy was the star performer last year on the back of President Trump’s tax-cutting adventures.
The experience elsewhere was less compelling.
In Europe, the German Dax lost over 18%, the French Cac lost 11%, the Euro Stoxx 50 lost 14.3%, and the Ftse-100 index lost 12.5%.
In general, it turned out to be a wake-up call for investors who had enjoyed a stellar nine-year period and did not appear to bode well for the coming year. How wrong such bodings were.
The reasons for the more difficult year in 2018 were reasonably straightforward. Economic growth slowed markedly in the eurozone as the year progressed.
Although the US economy was doing well, there were concerns that the intoxicating effects of the tax cuts would eventually wane.
President Trump was pursuing a very isolationist trade policy and entered into quite the spat with China and the Chinese economy lost momentum.
At the same time, a number of large emerging market economies were in serious difficulty as US interest rates were being tightened and Brexit was lurching along in no particular direction.
Quantitative Easing was nearing the end and markets feared that quantitative tightening would follow.
In the event, these fears, which I held in early January, have proven to be totally unfounded, at least thus far.
As we move into the second quarter of the year, the performance of equity markets is quite stellar.
The S&P has gained by almost 15%; the Euro Stoxx 50 is up 14.4%; and the Ftse-100 has risen by over 10%.
These very strong performances are occurring despite serious concerns about the global economy.
The IMF warned this week that global growth in 2019 will be the lowest in a decade but does believe in some improvement next year.
From the perspective of equity markets, the slower growth means that the prognosis for interest rates has improved significantly.
For example, 10-year bond yields in Germany have slipped into negative territory once again.
The US Federal Reserve has made it clear that it will not be increasing interest rates for the foreseeable future, and the timing of the first ECB interest rate increase since 2011, is probably years down the road.
There are no signs of inflation almost anywhere, and Europe, in particular, is starting to look a lot like Japan.
In a nutshell, somewhat counter-intuitively, the travails of the global economy are lending solid support to global equity markets at the moment.
From an investor perspective, if returns are the goal, there are not too many options other than equities and a bit of property.