by Scott Ronalds

There are many hot spots around the globe right now: North Korea, Trump, and Catalonia to name a few. In the face of it all, markets keep climbing higher.

This, in itself, isn’t unusual. Markets are unpredictable and erratic in the short term. What seems remarkable to me, though, is the low volatility we’ve seen, especially considering the view amongst many professionals that stocks are fully valued, if not expensive. Stock markets have been moving in a much lower-than-normal range, particularly the granddaddy of them all, the S&P 500. The CBOE Volatility Index (VIX), which is a gauge of near-term stock market volatility, fell to multi-decade lows in the summer and hit another fresh low earlier this month.

To be sure, there are some positives to point to: the global economy is growing at a nice pace, interest rates are low (albeit rising) and inflation is tame. Still, it just feels a little weird.

I’ve heard the same comment from other investors, as well as some clients who are feeling uneasy. They’re asking if we’re doing anything different in our portfolios.

We haven’t made any notable changes of late. We remain cautious, though, and this is reflected in the positioning of our Founders Fund, where we’re holding a lower stock weighting than normal, a much lower bond weighting, and considerably more cash than usual (see our Outlook for further details). Our equity fund managers also have a cautious outlook. They’re focusing on well-financed companies and avoiding those with high valuations.

These are good times. It’s been dubbed the “Goldilocks economy” (not too hot, not too cold). It’s important to enjoy it, but we should also be prepared to see some bigger swings in the markets going forward. Those bears will be back for their porridge at some point.