The Dow has not had an intraday move greater than 1% in the past 51 trading days. That’s a new record.
What was the prior record? A 50 trading-day run that ended in February of this year.
In 2008, there was only a single trading day with an intraday range less than 1% (December 24, 2008). In 2017, 200 out of 209 trading days have met this criteria, on pace for the highest percentage of any year in history (95.7%).
Why has volatility been crushed? There are many interesting theories (all in hindsight – no one predicted 2017 to be a low volatility year), but no one really knows. In the end, it all boils down to investor psychology.
The mindset of investors today is that all news is good news. Taking a look at the backdrop, can you blame them?
This will likely be the 9th straight year of gains for U.S. equities, tying the record from 1991-1999.
The Dow is on pace to hit the most all-time highs in a single year since 1995.
The story stocks (FANGs) are posting enormous gains and beating all expectations.
Earnings are at a record high and profit margins remain near their highest level in history.
The Unemployment Rate (4.2%) is at a 16-year low.
The U.S. economic expansion, at 99 months, is the 3rd longest in history.
Manufacturing (ISM) sentiment is at a 13-year high.
Consumer Confidence is at a 17-year high.
Housing prices nationally continue to hit record highs, gaining 6% in the past year.
Average hourly earnings are up 2.9% in the past year, their highest level of the cycle.
Inflation remains low with core CPI below 2%.
The Fed and remains extraordinarily easy (1-1.25%) as do central banks globally (negative policy rates across Europe and Japan). One of their primary objectives continues to include asset price inflation (“wealth effect”).
On the policy front, investors have been promised massive tax cuts, unending deregulation, and a boom in infrastructure projects.
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