Where Did The Volatility Go?

The incredibly nonvolatile equity market continues. As we noted two weeks ago, the Dow was in the midst of the tightest monthly range ever. Although more equity new highs have been made since then, we’d still have to call the market action incredibly slow.

For instance, the S&P 500 hasn’t closed down more than 1% for an incredible 74 days in a row, the longest streak since 2006. It has also closed within 1.5% of the all-time high for 54 straight days, the third-longest such streak going back 45 years. Then, on Thursday and Friday of last week, the S&P 500 in a daily range of less than 0.33%, for the first time back-to-back since late December 2016. You have to go back 28 months to find the time it happened before that.

Speaking of the small intraday ranges, the S&P 500 has now gone 29 consecutive days without trading in a range of more than 1%. Considering the average daily range going back to 1970 is 1.5%, this is an incredibly slow stretch for equities. Per Ryan Detrick, Senior Market Strategist, “You have to go back to September 1995 to find the last time we saw 29 consecutive days without a 1% intraday range on the S&P 500. Although things are boring, the good news is these periods of small daily ranges rarely lead to large sell-offs once they are over.”

01-30-17-fig-1

Although a very small sample size, the returns after the three times the S&P 500 made it 29 days without a 1% daily range were consistent with periods that did not see large sell-offs, which could be a positive sign for equities.

01-30-17-fig-2

 

IMPORTANT DISCLOSURES

Past performance is no guarantee of future results.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.

The economic forecasts set forth in the presentation may not develop as predicted.

Indices are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The Dow Jones Industrial Average (DJIA) Index is comprised of U.S.-listed stocks of companies that produce other (nontransportation and nonutility) goods and services. The Dow Jones Industrial Averages are maintained by editors of The Wall Street Journal. While the stock selection process is somewhat subjective, a stock typically is added only if the company has an excellent reputation, demonstrates sustained growth, is of interest to a large number of investors, and accurately represents the market sectors covered by the average. The Dow Jones averages are unique in that they are price weighted; therefore, their component weightings are affected only by changes in the stocks’ prices.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor
Member FINRA/SIPC

Tracking #1-576930 (Exp. 1/18)