The S&P 500 has experienced 377 consecutive days without a 2.05% sell-off, marking the longest period of such stability since the financial crisis, according to FactSet data compiled by CNBC.
Market Dynamics and Tech Stock Surge
This period of relative calm coincides with a significant influx of investment into megacap tech stocks, such as Nvidia, driven by expectations that advancements in artificial intelligence will substantially boost profits. Year-to-date, the S&P 500 has risen more than 14%, buoyed by anticipation of Federal Reserve rate cuts and new data indicating that inflation is moving closer to the central bank’s 2% target.
Adam Turnquist, chief technical strategist at LPL Financial, noted, “At a high level, the clouds of macro uncertainty have parted over the last 12 months as receding inflation provided much-needed clarity into the future path of monetary policy. The changing narrative from rate hikes to rate cuts and recessions to economic resilience helped drag the VIX down to multiyear lows, ultimately shifting the backdrop for stocks to a low-volatility regime.”
Volatility Index at Historic Lows
The CBOE Volatility Index (VIX), widely regarded as Wall Street’s fear gauge, hit its lowest level since November 2020 last month and traded around 13 on Friday, near historically low levels. Joseph Cusick, senior vice president and portfolio specialist at Calamos Investments, commented, “The low VIX reflects the options market’s complacency, with VIX at a three-year low. This makes sense since institutions have been actively hedging; there is no urgency to sell underlying assets with these insurance products in place.”
Future Outlook
The duration of this low-volatility period remains uncertain. In 2017, the S&P 500 experienced just eight daily moves of more than 1%, while the VIX dropped to historic lows below 9. However, volatility returned to the market the following year, with the VIX surging above 50 before settling down.
As the market continues to navigate evolving economic conditions, investors will be closely monitoring indicators such as inflation trends and Federal Reserve policy to gauge future volatility and market performance.
