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After an extraordinary two-year period of market calm, the major U.S. equity markets slipped into correction territory last week. A perfect storm of investor worries collided over the past six trading days, including inflation, monetary policy, and the unwinding of crowded, complex trades. The result was an unprecedented bout of market volatility, highlighted by 1,000-point swings in the Dow Jones Industrial Average and the fastest retreat ever (nine days) from a record level in the S&P 500 Index to a correction

By now, you've seen the headlines, full of scary-sounding words like rout and storm, plunge and crash. Whatever you want to call it, investors have certainly endured a rough time over the past few days. The Dow, dominating the media's coverage as usual, dropped more than 600 points on February 2, and almost 1,200 points on February 5.1 That's a single-day decline of 4.6%, the largest since 2011.1 The other major indexes were shaky, too.

Did stocks just melt-up, setting up a possible melt-down? Friday’s sharp decline, the biggest since the Brexit vote in June 2016, might have led us to forget that just a few days ago many claimed the stock market was melting up. The strong finish to 2017 followed by big gains in January certainly made this a reasonable characterization. (Though we continue to believe stock valuations are well supported by fundamentals here.)

The U.S. dollar was in the news recently after comments from Treasury Secretary Mnuchin, European Central Bank (ECB) President Draghi, and President Trump created volatility in the world’s reserve currency. Mnuchin indicated that a weak dollar could benefit the United States as it relates to trade and opportunities. Drahgi said that a strong euro (and by extension a weaker dollar) is understandable given strong European growth, but he also raised concerns that if other countries start targeting specific currency levels, it could have an impact on the ECB’s ability to meet its inflation goals. Trump then followed up saying that he ultimately wants a strong dollar. This mixed messaging has led some to ask why there seems to be disagreement on the path the dollar should take, and what it means for markets.

I'd like to tell you a fable that makes a true point. Once upon a time, some eminent scientists developed an interest in the bumblebee. (Let's make them actual rocket scientists, at NASA.) They hoped the tiny insect held some secrets of flight that could be applied to shuttles re-entering the atmosphere.

Global economic growth exceeded expectations in 2017, and we expect another strong year in 2018. The Citi Global Economic Surprise Index, which was well above zero for most of the second half of 2017, signaled that global economic data was exceeding expectations [Figure 1]. Drivers of strong global performance in 2017 included steady growth in the United States, better-thanexpected economic data in Europe, continued positive performance from Japan, and stabilization in China following several years of deceleration.