The Year Of Serenity Continues

It’s hard to believe, but the Brexit vote and subsequent global equity sell-off was a year ago. That was also the last time the S&P 500 Index saw a 5% correction, marking the past year among one of the calmest in the history of the U.S. stock markets. We are sure not too many people (ourselves included) would have (or did) expect that a year ago.

As we near the midway point of 2017, yet another incredible sign of how non-volatile things have been has surfaced. Per Ryan Detrick, Senior Market Strategist, “As amazing as this might sound, the S&P 500 hasn’t posted a weekly decline of 2% or more since September. In fact, only once since the February 2016 lows has the index notched a weekly loss of at least 2%; that comes out to 72 weeks!” For some more color on this, this is the longest streak since 61 straight weeks ended in early 1996. The year 1995 is also the last time a full year didn’t have a weekly 2% drop, and since 1950, the S&P 500 has averaged six 2% weekly drops per year.

How rare has the action, or lack thereof, been in 2017? Over the past 13 trading sessions, the S&P 500 closed up or down less than 0.16% nine times. That’s the third time already this year that has happened. The two previous times it happened were in 1969 and 1995; and those two years are widely considered two of the least (if not the least) volatile in history.

What does it mean? Tranquility doesn’t last forever, and we expect equity market volatility to pick up during the second half of this year as the economic cycle continues to age. And, that wouldn’t necessarily be a bad thing. In fact, volatility can be healthy for markets, and as we discussed in our recently released Midyear Outlook 2017: A Shift in Market Control publication, we would view any pullbacks as an opportunity to add to positions.


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