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The last time Wall Street trading was this quiet, Lyndon Johnson was president, The Sound of Music was the movie to see, and on the radio, the Rolling Stones were searching for satisfaction.
According to an analysis by Michael Batnick, director of research at Ritholtz Wealth Management, volatility in the U.S. equity market hasn’t just been in short supply of late, it’s on track for its lowest level in 52 years.
“For the first half of the year, the average absolute daily price change, meaning all negative signs are removed, is just 0.32%. If the year ended today, this would be the smallest daily price change since 1965,” he wrote in a blog post. “It’s hard to imagine a period in which there’s been such a wide gap between daily political volatility and daily stock market volatility.”
That trading has been placid certainly won’t come as a surprise to investors. So far this year, the S&P 500 SPX, +0.76% has only closed with a move of at least 1% (in either direction) four times, an atypically low number. The Nasdaq Composite Index COMP, +0.99% which has been more volatile in 2017 due to its higher exposure to technology and internet stocks—which themselves have seen large moves in both directions—has had 11 sessions with a 1% move.
Meanwhile, the CBOE Volatility index VIX, -4.96% recently fell to a multidecade low and has traded under its long-term average fairly consistently for years. Jeffrey Kleintop, chief global investment strategist at Charles Schwab, earlier this week wrote that low volatility was one of the market’s four biggest candidates for being in a bubble, although he offered reason that investors shouldn’t be fretful.
While such a quietude may be bad for day traders, who tend to thrive on market gyrations, profiting from short-term moves, it hasn’t been bad for investors. Major indexes are up strongly on the year—the S&P 500 has gained 9.1% thus far in 2017—and they have hit a series of records.
Furthermore, “not only has the market been incredibly quiet, but it has also been incredibly resilient,” Batnick wrote. “The S&P 500 has been within 5% of its all-time high for 261 straight days. The last time it was more than 5% away was July 27, 2016. That lasted one day. So going back to March 2016, the S&P 500 has been within 5% of its all-time high for 332 out of 333 days.”
Batnick noted that this kind of environment was unusual, saying it “could change at any time of course, and in fact I would expect it to.”