That Eerie Silence

My home is humming with life most of the time.  My wife Christen and I have two sons (14 and 11), three dogs (Bailey, a maltipoo;  Maggie, a snoodle;  Lieutenant Dan, a three-legged mutt), and a cat (Mr. Hemingway).  Among the eight of us, there is almost always a buzz of activity and noise.   It’s only when things get quiet that I become concerned…

To say that things have been quiet in the market lately would be an understatement.  It’s eerily quiet.   With November’s close, the S&P 500 has now gone higher every month for 13 consecutive months.  The longest stretch for consecutive “up” months is 15 months in a row during 1958-1959. The truly strangest part of the rally has been the calmness of the upward ride. 

From 2010 to 2016 the S&P 500 had 417 trading days in which the index went up or down by at least 1% or more.  That’s an average of roughly 60 days per year of at least a 1% swing.  So far, in 2017, we’ve had exactly 10 such days, the lowest reading since 1965.  Politically, this year has been anything but calm, but markets have continued to ignore the headlines and have moved higher month after month.

The calmness isn’t confined to the US.  The Wall Street Journal provides daily data on forty stock markets around the world. Thirty-nine of the forty are “up” on the year.  The only exception is Israel, which is down 2.4% as of 11/28.  And it’s not just stocks.  Fifty-five of the fifty-seven bond indices reported by the Wall Street Journal are positive this year (bond indices in Germany and the Netherlands are down less than 1%).  Everywhere you look, it’s as if risk has disappeared.  It’s… eerie. 

Employment numbers in the US increased for 83 consecutive months before being derailed by the hurricanes in September.  Still, the number of months set the record for the longest consecutive streak of job growth in US history.  Retail sales for Black Friday also set records, and Adobe Analytics forecasts that online retail sales will surpass the $100 billion threshold for the first time ever. 

We will all likely look back on this time as a uniquely nice, but strange, anomaly.  We are currently living in the “good ole days” of the market.  It’s enjoyable.  It’s kind of boring.  It’s eerie.  And it may even last a bit longer… but it’s also somewhat concerning.

Source: MFS “By the Numbers” November 27, 2017