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U.S. stock market investors may be having that squeamish “it’s quiet out there…too quiet” feeling, but the lack of market pullbacks isn’t just limited to domestic markets as one strategist points out, a lack of stock-market volatility has become a global phenomenon.
In a recent post, LPL Financial said 2017 is shaping up to be the quietest year in global stock market volatility since 1990 as corrections in equity markets, defined as a decline of at least 10% from a recent peak, have become a rarity.
For its part, the S&P 500 index SPX, +0.03% has gone 272 trading days (counting Wednesday) without a 5% or more pullback, the longest such streak since July 19, 1929, when it went 369 trading days without such a pullback, according to Dow Jones data.
Meanwhile, the CBOE Volatility index VIX, +1.80% is down 34% for the year and is currently around 9.40. On Wednesday, the so-called “fear gauge,” which tracks expected 30-day market volatility based on S&P 500 options trades, fell to its lowest intraday level ever of 8.84, according to FactSet data.
Lowest VIX ever, after Fed meeting wraps.
That brief drop followed the conclusion of the Federal Reserve’s July policy meeting, where the central bank said it would start reducing its $4.5 trillion balance sheet “relatively soon” and focus on stubbornly low inflation.
“There must be something in the water around the globe, because the S&P 500 isn’t the only major index that hasn’t pulled back much in 2017, and we’ve never seen anything like this before,” said Ryan Detrick, LPL senior market strategist.
Year to date, the MSCI Emerging Markets index is up more than 23%, MSCI Europe Asia Far East index is up more than 14%, S&P 500 up more than 10%, and the Nikkei NIK, +0.48% is up nearly 5%.
As tracked by exchange-traded funds, the iShares MSCI Emerging Markets ETF EEM, +0.82% is up 25%, the iShares MSCI EAFE ETF EFA, +0.62% is up 15%, the iShares MSCI Japan ETF EWJ, +0.31% is up more than 10%, and the SPDR S&P 500 ETF Trust SPY, +0.00% is up nearly 11%.
On its blog, LPL called the global lack of stock market volatility “extremely rare”:
|History would suggest that what we’ve seen so far this year is extremely rare, and to see it continue through the end of the year would be even rarer. Some type of increased volatility around the globe would be perfectly normal. When it comes, it will be important to remember that volatility is just that: normal. We appreciate that it can be easy to get lulled into a sense of comfort after such a long stretch of market serenity, but that isn’t how markets usually work.|