The first four months of 2016 were for the record books — and may portend what’s ahead for the rest of the year. 
A historic downdraft in prices of risk assets was followed by a sharp rally that took most risk asset markets back into the black. One broad global index tells the tale. The MSCI All World Index slid 11.4% through mid-February, yet it ended the quarter in positive territory. Investors can be forgiven for feeling disoriented at this “tale of two markets.” 
The near future easily could replicate such volatility. Investor sentiment remains fragile, and it’s reasonable to expect that some of the first-quarter concerns will resurface. We require a sustainable decrease in world oil supplies to justify the rebound in energy. 
We also must watch carefully and closely the progress that China makes to gain more control over capital flows and currency fluctuations. Its transition will be fraught with bumps. 
Add some emerging risks to these concerns: The U.S. presidential election, an earnings outlook that is murky at best, and the risk that Great Britain will exit the European Union and what that may mean to the Eurozone politically and economically. 
Let’s examine more closely the early market decline to help determine if the subsequent rally has legs, while also remembering our premise that the markets are risky and uncertainty always reigns.
Most markets started the year with much to worry about: 
• The U.S. Federal Reserve’s plans to raise interest rates significantly, and the effect that might have on emerging markets.
• Fears that a hard economic landing in China might throw the world into a recession.
• Anxieties that collapsing energy prices signaled a slowdown in economic growth.
• Concerns that the growing migration crisis in Europe could exacerbate political fissures.
Not surprising, investors were concerned about how quickly the Fed would normalize interest rates, given the fragility of the global growth outlook and a further decline in inflation expectations. Federal Reserve Chairman Janet Yellen has since allayed those worries, signaling that future rate hikes will be gradual and data-dependent. 
At the same time, the European Central Bank took additional easing measures and Japan began its negative interest-rate policy experiment. It’s clear that global monetary policy will remain accommodative for the foreseeable future.
Meanwhile, the global economic wheels keep spinning and key data from the U.S., China and the Eurozone indicate that rumors of a global recession were greatly exaggerated. As for risk control assets as well as high-quality fixed income and inflation-protected Treasury securities, their positive returns in 2016 have provided investors with consistent and robust diversification benefits. We expect interest rates to continues to be low(er) for long(er), so we anticipate relatively low but positive returns from high quality fixed income and a continued and important benefit to portfolios through the diversification contribution.
We remain positive about on risk assets, reflecting the continued tailwind of accommodative central banks, a renewed confidence in the ability of the global economy to avoid recession, a People’s Bank of China in more control over capital flows and currency fluctuations and a recovery in commodities. 
We are confident that investors will look through some of the near-term noise of the pending U.K. vote on exiting the European Common Market and recognize they will be compensated over the long term for taking risk. 
We also forecast a volatile period when markets will continue to exhibit wide daily swings to reflect near-term risks. This can be a particularly dangerous environment for many individual investors who tend to lose their resolve in the midst of the downtrend. 
Investment success will hinge on the ability to withstand the inevitable volatility and “stay the course” with their investment strategies.

Nixon is chief investment officer for Northern Trust Wealth Management.