The S&P 500 and Nasdaq just hit all-time highs. Meanwhile, measures of volatility in the Dow, S&P 500, and Nasdaq just hit their lowest levels since 2007. Volatility rises when there's uncertainty. And falls as investors get more confident.
Investors are clearly confident.
As you can see in the Chart of the Day below, 60-day realized volatility (a fancy way of saying historical volatility) hit a cycle low. "That's pulverized the bears," writes Hedgeye CEO Keith McCullough in this morning's Early Look. Just 41 days into 2017 and the Nasdaq, S&P 500 and Russell 2000 are up 6.2%, 3.3% and 1.9% respectively.
Falling Volatility: What now?
Simple. Book some gains but keep your core position in U.S. equities. Buy more on pullbacks. Why? Here's a brief synopsis with links for further reading:
- The U.S. economy is growing. (The Trump Tracker: Stock Market Next Stop? Correction or All-Time Highs?)
- S&P 500 earnings season is heating up. (An Earnings Season Update: From Winter Stagnation to Spring Growth)
- Market volume confirms a broad base of investors continue to buy the rally in stocks. (Stock Market Volatility Is Falling: Blame Trump?)
And Something for the Stock Market Bears...
If you’re looking for a fundamental stock market correction catalyst, the first big one is in April when we get first quarter GDP.
(Click here to learn more about subscribing and how to position for a potential correction.)