I haven’t had to take a Dramamine pill for quite a while now.  Seems like over the past seven years I’ve been popping them like M&M’s, to keep my stomach in line with all the ups and downs of the stock market. Not that I’m complaining, but where has all the volatility gone?

Up until last year’s election, it didn’t take much to move the stock market up or down several percentage points in a day. Since the election, we have had a couple of interest rate hikes by the Fed; Korea shooting off dud after dud, trying to figure out how they can launch a nuclear missile; Escalating violence and even the use of chemical weapons in Syria; Failure by Congress to “repeal and replace” the Affordable Health Care Act; and most recently a worldwide cyber-attack that shut down computer systems all over the world. In the past, any one of these events would have sent investor’s running to the sideline in droves. Now, the markets react in sort of a ‘Ho-Hum” way.

So, what’s up? First, corporate earnings have been good and look to remain good throughout the balance of 2017. Good profits generally equate to good stock prices. The Fed has raised rates twice since the election and the economy has withstood them quite well. So the fear of how the economy will hold up when the Fed raises rates has been answered. Plus somewhat higher rates can be healthy for some sectors of the economy, like banks. Unemployment continues to creep lower, which is a positive for the economy as more people have jobs and will, in theory, spend money. Housing is rebounding (even a bit here in Mesa County), which is also a positive. Consumer confidence is high, which is another positive.

Now not all is rosy either. First quarter GDP came in lower than expected, meaning maybe the economy isn’t as healthy as people think. It’s seeming more and more like we’re in for another term of a “do nothing,” obstructionist Congress. All they can think about is what party wins this battle. No one ever asks if the American people win. So any meaningful legislation concerning tax reform or balancing the budget is once again unlikely.

Market volatility is driven by investor sentiment and investor sentiment is driven by how the investor perceives events are going. That sentiment can range from sheer euphoria to outright panic. Right now it’s somewhere in the “calm” middle. So enjoy the mellow ride because sometime down the road, we will once again get to ride the volatility roller coaster.

 

Mike Berry is a Registered Representative offering securities through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Legacy Wealth Management, LLC and Cambridge are not affiliated. Cambridge does not offer tax advice.

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