UPDATE: Low stock volatility won't last forever, but the quiet may not end quickly
By Ryan Vlastelica
Volatility won't spike simply because quiet markets are unsustainable, analyst says
It's the trillion-dollar question: when will volatility return, and what will be the cause?
The unprecedented calm of the U.S. stock market has been one of the most notable trends of 2017. September featured a stretch of the quietest trading in history (http://www.marketwatch.com/story/september-slump-on-wall-street-at-least-not-yet-2017-09-19), while the S&P 500 has only closed with a 1% move eight times this year, on track for the fewest since 1995 (http://www.marketwatch.com/story/enjoying-the-calm-market-dont-expect-it-to-last-forever-2017-10-03), per LPL Financial data. Perhaps most notably, the CBOE Volatility index has almost unceasingly traded below 10, representing half its long-term average, and it dropped to a record low earlier this year (http://www.marketwatch.com/story/why-vix-is-flirting-with-its-lowest-level-in-history-and-how-wall-street-is-reacting-2017-07-25).
Related:ETF volumes go near mute levels as volatility drops to near-record lows (http://www.marketwatch.com/story/etf-volumes-go-near-mute-levels-as-volatility-drops-to-near-record-lows-2017-08-04)
In one of the most telling stats about the current environment, the VIX only settled below 10 nine times before 2016 (it was launched in the early 1990s). Since then, according to data provided by Natixis Global Asset Management, it has done so 26 times, including on Wednesday.
The market action has raised plenty of questions about whether the lack of fear is justified by positive tailwinds--such as improved earnings, economic data, and the prospect of tax-reform legislation in Washington--or whether it is a sign of complacency on the part of investors. One thing experts do agree on, however, is that the current environment won't last forever.
Read:Wall Street's 'fear gauge' is falling, bonds and the stock market are soaring--something has gotta give (http://www.marketwatch.com/story/wall-street-fear-gauge-tanks-stocks-and-bonds-soarsomethings-gotta-give-2017-05-02)