"There are so many worlds as there are kinds of days, and as an opal changes its colours and its fire to match the nature of a day, so do I."
John Steinback, "Travels with Charley", 1962
US author John Steinbeck championed the ability of individuals to adapt to new environments. Investors should be similarly adaptive. Volatility may have declined in Q2 after a jumpy start to the year, but our forward-looking indicators suggest that markets are tiring at the end of a long cycle: US equity valuations are stretched relative to history and asset-class correlations are primed for decoupling.
Markets are vulnerable to shocks, and investors should be ready for new colours and fire.