SEI Investments : Q4 2018 Quarterly Investment Review

Hi, I'm Kevin Barr, Head of SEI's Investment Management Unit. Over the next few minutes, I will provide an overview of the global financial markets and our perspective on them.

Stock market volatility was the big story in the fourth quarter of 2018. The VIX Index, which is used to gauge expected volatility in the S&P 500 index, rises when there is turmoil in the financial markets. Its sharp upward moves in the fourth quarter reflected investors' concerns.

When the VIX moves up, the S&P 500 tends to move down. It fell nearly 20% in the fourth quarter before recovering slightly. The decline reflected fears about trade with China, uncertainty around Brexit, trouble in Washington and concerns over rising interest rates.

The MSCI All-Country World Index, a proxy for global equity markets, followed a similar path.

The fourth quarter's difficult environment created notable headwinds for SEI strategies. While big declines in stock prices are unsettling, we caution against making emotion-driven portfolio changes during volatile market conditions.

Rather than sell portfolio holdings at depressed prices, we believe investors can take more constructive action. Recent declines have created an opportunity to rebalance back toward today's more attractively valued equities.

Looking ahead, the same risks that marked much of 2018 are with us in the New Year. Trade tensions, interest rates and slower economic growth remain at the top of the list. While the aging bull market isn't getting any younger, bull markets usually die from policy missteps and contracting economic fundamentals. At the moment, economic fundamentals remain solid, there are few signs of recessionary conditions and the pace of interest rates hikes is expected to moderate.
With respect to the financial markets, we expect to see the dominance of U.S. technology stocks continue to fade and market volatility to remain high. We believe this environment will present more favorable conditions for diversified portfolios and value-oriented stocks, both of which we view favorably. Accordingly, we encourage investors to remain patient and stick with their long-term strategies.

On behalf of everyone at SEI, thank you, as always for your trust and confidence.