The stock market hasn't been this confident in 24 years
The stock market hasn't been this sure of itself since President Bill Clinton first took office.
Or rather, the VIX, a measure designed to track stock market fear, is at its lowest level in 24 years.
While alarmists may view this as a negative — a signal that complacency has made traders vulnerable to an unforeseen shock — many investors simply see it as a byproduct of conditions ideal for stocks to continue edging higher.
"At this point I'm not worried about a low VIX," Michael Antonelli, an institutional equity sales trader and managing director at Robert W. Baird in Milwaukee, told Business Insider. "One of the hallmarks of our current bull market is a tape that slowly and relentlessly grinds higher, and that just crushes volatility. There's just so much to be bullish about, so many sectors and charts that look spectacular."
One popular rationale for the so-called melt up in stocks is that middling economic growth has kept the Federal Reserve from quickly tightening monetary policy. As a result, investors haven't fled the stock market in favor of fixed income, and gains haven't gotten so overheated that a corrective phase has been necessary.
Kate Moore, the chief equity strategist for BlackRock, which oversees $5.4 trillion, recently told Business Insider that conditions in the US were in a "sweet spot." Growth is strong enough that the Fed feels comfortable normalizing policy, but it's not doing so in rapid fashion, she said.
In addition, the US market is in the middle of an expansionary period for corporate profits. The biggest driver of share gains, earnings growth for the S&P 500, is expected to be 7.3% in the second quarter, which would mark its fourth straight period of expansion, according to data compiled by Bloomberg.
That the VIX hit its 24-year low on the same day when the S&P 500 closed at an all-time high isn't all that surprising, considering the two gauges trade inversely to each other roughly 80% of the time. What's interesting about it is the lack of worry.
To Richard Sichel, the senior investment strategist at Philadelphia Trust, which oversees $1.7 billion, that dynamic has some people feeling bearish — even if there isn't a compelling fundamental reason.
"I come across a lot of people that are bears just because the market is high," Sichel told Business Insider. "We don't see it that way. We think earnings are going to be good, and there's still a lot of hope for pro-business activity ahead." Read » | | | |
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