Wall Street activity typically slows to a crawl during the summer but this is absurd. The last day of spring (Friday) and the first day of summer on Monday combined to create a trading range that encompassed less than five points on the S&P 500 (^GSPC).
According to Bespoke it was tightest trading range for a two day period since 1994 and Tuesday’s somnambulant rally did little to relieve the tedium. For all the talk of complacency the truth is the actual trailing range on the major markets actually makes the VIX (^VIX) look, if anything, too high.
In the attached clip Danni Hughes of Divine Capital Markets says she welcomes the lack of excitement. “I actually think it’s pretty nice,” she says, “People are starting to feel a little more confident about the market. People are actually more willing to come back in.”
Of course one person’s comfort is another’s complacency. As Hughes notes, the current thinking among traders is that Iraq is “priced into markets;” a ludicrous idea on the surface given the number of different scenarios that could play out involving ISIS, Iraq and Iran.
Historically speaking that’s exactly when things go completely sour, but whatever geopolitical shocks may be lurking it’s hard to find a compelling way to profit from them, at least for the moment.
There’s another reason the activity could be so slow. Fittingly for a sleepy market, her thesis involves a bedtime story.
“It’s a Goldilocks scenario right now. You’ve got rates that are going to stay exactly the same until 2015, at least that’s what the Fed says. You have kind of questionable inflationary situation but maybe slowing growth will keep things as they are for a little while longer. So (stocks are) really the only way to play.”