In financial markets, equilibrium is a constantly moving target; the textbook “steady state” or “balance” doesn’t exist in an open and global economy. Some external shock is introduced and markets adjust to find the new balance between supply and demand for different assets. In the meantime, this sows the seeds of some new disruption elsewhere down the line. In the investing world, dislocation and volatility create opportunity and, from a risk management perspective, provide valuable real-world stress-test information. 2011 was an important year in this respect and had material implications for portfolio construction that we want to share with you.