November 6, 2017

It’s been a record-breaking year for the stock market so far. We’ve experienced record high after record high – 62 in all as of this writing. That makes 2017 the third-best year in market history in terms of record highs, trailing only 1965 and 1995.

Volatility is basically gone. The Chicago Board Options Exchange has a volatility index (ticker: VIX) which measures the market’s expected 30-day volatility. It’s sometimes called investors’ “fear gauge.” As it rises, investors expect more volatility. Before 2017, the VIX index closed at 10 or lower just nine times in its 27-year history.

This year alone, that number has quadrupled. VIX had sub-10 closes 34 times in 2017 as of this writing, and there could be more coming. Volatility was so low in July that VIX’s 8.84 average intraday rate was a record low. As of just a few weeks ago, we had 242 days without a 3 percent intraday decline in the S&P 500, breaking the record of 241 set in 1996.

Stocks also completed a rare trifecta recently. The market closed at a record daily high every day in one week. That also marked consecutive record weekly high closes for six straight weeks. And the cherry on the sundae – it closed with consecutive record monthly highs for the past seven months.

That combination has never happened before. Unsurprisingly, people are jumping back in the market. U.S. equity funds had their largest inflows in more than four months. Tech stocks took in $1 billion, the biggest haul in 38 weeks, meaning people are buying tech and taking risks.

It’s what usually happens in the late stages of a bull market.

To paraphrase Warren Buffet – be fearful when others are greedy, and greedy when others are fearful. It’s Halloween season, so fear seems appropriate.