FTDS - The Unnerving Calm Of Equity Markets

2024-07-03 02:30:00 ET

Summary

• U.S. equity markets are in a period of extended calm, with the benchmark S&P 500 Index closing in on one year since it last dropped 2% in a single day.
• An extended period of calm means investors must be vigilant and not become complacent. However, it's not necessarily a harbinger of an impending volatility event.
• Our cycle, valuation, and sentiment investing framework does not suggest that an uptick in volatility is imminent.

Parents with young children can relate to the fear that grips us when there's been an extended period of calm or silence in the home - surely, the kids are up to something! Now, my son is in college, and my daughter will be next year, so the sources of our anxieties have shifted a bit.

But still, a recent story on CNBC ¹ about the lack of downside movement in the equity market caught my attention and got me thinking: should we be worried by this extended calm?...

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