The Most Complacent Markets in History

The VIX, the yardstick for measuring volatility in US stocks, is once again trading below 10.  Here are some statistics from Kyle Beard of Bloomsbury Advisory: “The VIX has only traded below 10 41 times since 1993 (intra-day). 21 of those occurrences have taken place since May 1, 2017. When you consider there have been 6,179 trading days since 1993, you realize how incredible this is.”

By the numbers:

It’s not just the VIX: as Bank of America’s David Woo points out, volatility across all financial markets has collapsed in recent months:

  • The MOVE index, which measures interest rate volatility across the US yield curve, is hovering just above the 52 level that represents the bottom of the index range since 1988. Only in 2007 and 2013 was the index lower, and then only barely.
  • VIX has again dropped below 10. The only time it was lower since the inception of the index in 1990 was briefly in 1993.
  • 3-month EUR/USD volatility is now below 7. Since the inception of the euro, EUR/USD volatility was only lower twice, in 2007 and 2014.

Back in the old days, when trades were hand-written on colored pieces of paper and shoved up pneumatic tubes, we thought complacency was a negative sign. This is way too quiet to be comfortable. Has everyone forgotten 2008?