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How quiet is this record-setting stock market? By at least one measure, the S&P 500 index is on pace to register is lengthiest period of quiescence in more than two decades—and perhaps ever.
The broad-market benchmark hasn’t experienced a decline of at least 3% since Nov. 7, 2016. That 234-day span registers as the second-longest period without a single-session drop of that magnitude since the 241 days from Jan. 26, 1995 to Jan. 9, 1996, according to Pension Partners’ Charles Bilello (see table below):
Just eight more trading sessions sans a 3% daily drop—a fairly normal occurrence even in a bull market—and the S&P 500 SPX, -0.17% will mark history.
An unnatural stretch of placid markets comes as the S&P 500, the Dow Jones Industrial DJIA, -0.14% and the Nasdaq Composite Index COMP, -0.18% have embarked upon one of the most resilient climbs to all-time highs. Neither a parade of hurricanes, earthquakes in Mexico, the threat of nuclear war in the Korean Peninsula, equity valuations seen as too rich, nor anxieties about the White House have disrupted this bull market rally that has entered its ninth year.
Bilello points out that the S&P 500 is on pace for its ninth consecutive year in the green, which would match a similar streak from 1991 to 1999 (see table below).
Moreover, the S&P 500 is up about 14% so far this year, the Dow is on track for a nearly 16% year-to-date climb, while the Nasdaq Composite is eyeing a 23% gain thus far in 2017.
And every major equity index that matters is at or near historic highs, with strategists pointing to what appears to be the first synchronized global economic uptrend ever as one of the underpinnings for investor optimism.
Meanwhile, volatility is declining, with the CBOE Volatility Index VIX, +0.61% a measure of expected volatility in the U.S. stock market, recently plumbed levels last seen in 1993 and is hovering around those lows.
So, does that mean that happy days are here to stay? Bilello cautions against being lulled into a false sense of security:
“The absence of risk does not mean the elimination of risk, just as the absence of rain does not mean there will never be another storm.”