In our inaugural Asset Allocation Quarterly, we named ‘higher volatility’ a core investment theme for coming months. Specifically, we said ‘as the cycle matures, the range of potential growth, inflation and interest rate outcomes is broadening from the very narrow range investors have been used to for much of the past decade post-financial crisis.’ The sharp rise in market volatility in October was a particularly acute illustration of this changing environment. And while we do expect volatility to calm somewhat from elevated levels over coming weeks, we also think the overall ‘volatility regime’ will be structurally higher than what investors have been used to over recent years. This does not mean we are of the view a bear market has begun—we do not think it has. But October’s price action is a reminder that returns in multi-asset portfolios are likely to be more muted on a risk-adjusted basis, and portfolio management will probably require more tactical positioning as we move into the late stages of the economic cycle. In this Macro Monthly we discuss our views on recent market volatility, why we believe we are in a higher volatility regime, and how we are navigating this environment in our portfolios.