UPDATE: 4 trends that will put markets back on a roller coaster
By Matthew Lynn
A move of 30 or 40 points on the Dow. The dollar up half a cent against the euro, then down again. A few dollars on the price of gold, quickly surrendered the next day.
On every available measure, the markets have become far less volatile this year than at any time over the last decade. Watching a nil-nil draw between a couple of sides that were already out of the World Cup was a more exciting way to spend June than looking at the price action on a terminal.
And yet, in truth, that is very odd. Over the past decade, the long-term trend has been for the markets to get more volatile rather than less.
In reality, this is a lull, not a permanent end to all storms. There are four big trends that will get the markets jumping more than a squirrel that has just had a can of Coke. Such as? Technology. A bond crash in the euro zone. The rise of the frontier markets. And a collapse in company profits. The only question is, when will it happen?
There is no denying that the markets have been exceptionally calm of late. The S&P 500 (SPX) has not managed a move of more than 1% in a single day since all the way back in the middle of April. The VIX (VIX) , known as the fear index because it measures expected future volatility, is hitting all-time lows.
It is not just equities. It is currencies as well. JP Morgan Chase's global FX volatility index last week sank to it lowest level since it was started way back in 1992. The BOE Volatility Index for U.S. Treasuries is down sharply over the past year. Even Greek bonds, which used to swing by double-digit percentage point all the time, trade very quietly right now. The excitement has drained out of every market you look at.
True, the roller-coaster markets of the last 30 years, with their massive swings between bull and bear runs, are not necessarily the historical norm. A few years ago, JP Morgan analyzed collapses, taking a 15% fall in the value of S&P 500 index over a 15-day period as its definition of a "crash'. For the post-1946 period, there was one of those in 1962, and another in 1987, but then you had to wait until 2002 for the next one.