After a rip-roaring start to 2021, stock markets have become, well, boring.
The S&P 500 has basically gone nowhere since April, eking out a 1 per cent gain. Bespoke Investment last week noted that, over the previous 12 trading days, the spread between the index’s intra-day high and low was just 1.65 per cent – the narrowest trading range in almost two years.
LPL Research’s Ryan Detrick noted the index had gone nine days in a row where it closed within 1 per cent of an all-time high without breaking through – “about as dull as it gets”, said Detrick.
Similarly, the Vix, or fear index, has fallen to subdued levels, as has volatility in the foreign exchange markets.
However, while markets “appear healthy on the surface”, this “ignores a more dubious picture under the hood in which markets remain fragile”, says Bank of America. Pointing to “extreme volatility” in economic data, it says foreign exchange markets are “underpriced for a macro shock” and that equity markets are also “too sanguine”.
None of this means this is a case of the calm before the storm, but under-the-surface instability does suggest markets may become less sleepy in coming months.