By almost any measure, last week was a tough one for the capital markets. As our table below reminds, March arrived like a lion as investors repriced risk with a vengeance. Among the major asset classes, only cash, TIPS and bonds in general were spared the selling.

Year to date, the performance tallies don’t look quite as bad. The question is whether the red ink will spread and deepen, or give way to the bulls once again? Excuses one way or the other will probably be found in this week’s economic reports, including today’s ISM Non-Manufacturing Index. The crowd knows that manufacturing has been weak, if not in a recession. Services, by contrast, have remained robust. And since services constitute a much bigger slice of the economy, this benchmark holds more sway as to what comes next. Adding to the statistical fun will be Friday’s non-farm payrolls report February.
For the moment, volatility is back. Painful as this fact is, it’s not entirely unexpected. As readers of this blog know, your editor has been sitting on overweight cash positions for some time in anticipation of exploiting rebalancing opportunities. We’re not sure if the red ink offers the opportunity of a lifetime, but it’s shaping up to be the best deal so far this year. Then again, the year is still young.