Wall Street’s recent ascent to record highs has been characterised by remarkably low volatility. S&P 500 has gone an impressive 377 days without a sell-off of 2.05% or more, longest such stretch since the financial crisis, according to FactSet data compiled by CNBC. Additionally, index hasn’t seen a gain of at least 2.15% during this period.
This unprecedented market calm can be attributed to investors flocking to megacap tech stocks like Nvidia, driven by optimism about artificial intelligence boosting profits. So far in 2024, S&P 500 has risen over 14%. Anticipations of Federal Reserve rate cuts have also lifted index, with new data indicating that inflation is nearing Fed’s 2% target.
Adam Turnquist, a chief technical strategist at LPL Financial, commented, “ clouds of macro uncertainty have parted over last 12 months as receding inflation provided much-needed clarity into future path of monetary policy. changing narrative from rate hikes to rate cuts and from recessions to economic resilience helped drag VIX down to multiyear lows, ultimately shifting backdrop for stocks to a low volatility regime.”
S&P 500’s steady rise without significant gains or sell-offs since the Great Financial Crisis is notable. CBOE Volatility Index (VIX), often seen as market’s fear gauge, hit its lowest level since November 2020 last month and was trading around 13 on Friday, close to historically low levels.
Joseph Cusick, senior vice president and portfolio specialist at Calamos Investments, noted, “ low VIX reflects options market’s complacency, with VIX at a three-year low. This makes sense since institutions have been actively hedging; re is no urgency to sell underlying with se insurance products in place.”