Volatility is just volatility; the market has gone through both bull markets and bear markets during times of low volatility and high volatility. It would be wrong to assume that low volatility means bad times are coming.
The thing we’re supposed to be worrying about now is that no one seems to be worried.
Seriously, that’s what Wall Street has come to, a point when The Wall Street Journal is running concurrent headlines saying that short-sellers — investors betting that the market will go down — are giving up, while wary investors have piled nearly $10 billion more into global stock funds in the week ending July 19.
Wall Street has always been a place where good news is often treated like it’s bad, and vice versa. But no one was squawking that the Dow Jones industrial average, the Standard & Poor’s 500, the Russell 1000 and Russell 2000 indexes all hit record highs just as that fresh flood of money was peaking.
No one seemed concerned about buying high and selling low at a time when the skeptics are having a tough time finding a catalyst for a long-awaited market meltdown.
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And so the worry du jour becomes that no one is worried.
The statistics show just how calm the market has become.
According to Terri Spath of Sierra Investment Management, it has been more than 260 days since the last time the Standard & Poor’s 500 went through a correction of 5 percent (which is more like a hiccup than a correction), and the first half of 2017 registered the second-smallest drawdown for the S&P 500 — a decline of 2.8 percent — since 1950.
In a normal year for the market, Spath noted, there’s a drawdown of 14 percent somewhere.
The CBOE Volatility Index or VIX — the so-called “fear gauge” which attempts to measure the expected volatility of the S&P 500 for the next 30 days — has closed under 10 a total of 13 times since May 8. It closed below that level on just 20 days in the preceding 27 years.
But volatility is just volatility; the market has gone through both bull markets and bear markets during times of low volatility and high volatility. It would be wrong to assume that low volatility means bad times are coming.
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