We have written about it in the past and probably will again in the future, but Wednesday’s volatility and volume were so unbelievably low, it boggled the mind. Volume was 50% less than the average and there was no volatility as the market’s total range was surely a joke. Yet, all of the major stock indices notched new all-time highs…as if nothing was out of the ordinary.
As it turns out, we’re not the only ones to find it odd…
“We seem to be living in the riskiest moment of our lives, and yet the stock market seems to be napping. I admit to not understanding it.’
–Dr. Richard Thaler, Nobel Prize winner
“We seem to be living in the riskiest moment of our lives, and yet the stock market seems to be napping,” Nobel Laureate Richard Thaler said, in an interview with Bloomberg. “I admit to not understanding it.” Additionally he said, “I don’t know about you, but I’m nervous, and it seems like when investors are nervous, they’re prone to being spooked,” (but) “Nothing seems to spook the market.”
True. So just how ridiculously low is the volatility? It was recently reported that the average October volatility, since the beginning of record keeping, has been 17.0%. This month it is a minuscule 5.2%, which is the lowest in 90 YEARS!
Want more proof of just how crazy this all is? OK, we’re game. The chart below shows that the S&P500 price-to-sales ratio is just 4% under its all-time high before the 2000 crash.
It’s probably nothing.
Is that fire I smell or smoldering embers that are about to ignite another Flash Crash?