Volatility Low & Risk High: What Does This Mean?

As the U.S. stock market hits new highs, and bond yields continue baffle everyone who “knew” that interest rates were bound to rise this year, the most dramatic data point of all might be volatility, which keeps plumbing remarkable lows. And this isn’t just stock-market volatility (as measured by the VIX index), the intermarket volatility index, which averages expected volatility of stocks, bonds, currencies, oil and gold is at its second lowest reading in 20 years. What does this mean? Not sure–mixed signals. One the one hand, low volatility means that prices aren’t moving much either way, which means that […]

The US Equity Bull Market: Where are we today?

As the bull market in US equities charges into its sixth year, I’ve been chewing on what drives stock prices higher. “Duh,” you say, “more buyers than sellers.” Sure, but what kinds of tailwinds encourage buyers to load up?  And how hard are those winds blowing today? Going into a recession, the stock market tanks in anticipation of a decline in corporate earnings.  Then in time the recession ends, earnings rise, and the stock market recovers.  So recovery from a bear market is driver #1.  Today?  Well, following the smash in 2008, US companies did enjoy strong earnings recovery from […]

The Current Market Environment

Sometimes we can only identify the distinctive characteristics of a particular economic environment after that period has passed. But sometimes we’re able to recognize those distinctive characteristics at the time. For example, it was pretty obvious by 1999 that we were experiencing a euphoric, tech-driven, stock-market boom. No one could say when it would end, but anyone who’d studied capital market history knew that sooner or later this boom was bound to bust, inflicting huge losses on those who were just then leaping onto the tech bandwagon. So what about today? Can we diagnose what ails us now? Unfortunately, yes. Studies by McKinsey, the IMF and, […]