| NEW YORK
NEW YORK May 23 Whatever investors are worried
about right now, those concerns are not showing up in Wall
Street's fear gauge. That scares some. On the other hand, it
more than likely means that stocks will keep taking things slow
The CBOE Volatility Index, or VIX, closed on Friday
at 11.36, its lowest level since March 2013. That means
investors see less risk ahead, particularly with the S&P 500
ending at a record high again on Friday.
With the typically slow summer months just ahead and little
on the horizon to shake the market from its current course,
investors could be looking at even lower VIX levels, some
"It's not that there's no likelihood of a correction. It's
that people don't perceive anything to derail the train at this
point," said Andrew Wilkinson, chief market analyst at
Interactive Brokers LLC in Greenwich, Connecticut. "So I think
people are beginning to wonder: Are we heading back to
The S&P 500's record high and the drop in the VIX are not the
only signs that fear is not a factor on Wall Street.
Volume is down as well. S&P 500 E-mini futures volume
was below the 1.52 million daily average of the past year on
every day this week except Tuesday.
The market's gain has come despite concerns about a slowdown
in China and weakness in small-cap names. Typically small-cap
stocks lead the market's advance when the U.S. economy is
However, the recent selloff in small-cap stocks, which drove
the Russell 2000 index briefly into correction territory
last week, seems to have slowed. The Russell gained 2.1 percent
this week, its biggest weekly bounce in more than a month. The
index is less than 7 percent below its record close of 1,208.65
in early March.
At the same time, the Dow Jones Transportation Average
hit record territory late Friday, nearly breaking above
the 8,000 level.
"One of the reasons the VIX is so low, we haven't really
done anything this year. We haven't moved an awful lot," said
J.J. Kinahan, chief derivatives officer of TD Ameritrade in
For the year, the S&P 500 has gained just 2.8 percent.
To be sure, some analysts say the lack of volatility
suggests a complacency that could encourage excessive
risk-taking. New York Federal Reserve Bank President William
Dudley and Dallas Fed President Richard Fisher have both
expressed such concerns in recent days.
"The lower the VIX, the more overbought the market gets,
leaving it vulnerable to some kind of setback," said Donald
Selkin, chief market strategist at National Securities in New
But the lack of volatility is also showing up in the
foreign-exchange and commodities markets, according to Bespoke
Investment Group analysts. They noted lower implied volatility
in options in the foreign-exchange market as well as recent
stability in the PowerShares Deutsche Bank Agriculture Index
"If the VIX index is pricing in too little volatility, then
why is it wrong to do so?" Bespoke analysts wrote.
(Wall St Week Ahead runs every Friday. Questions or comments
on this column can be emailed to:
(Reporting by Caroline Valetkevitch; Additional reporting by
Ryan Vlastelica; Editing by Jan Paschal)