Investors haven’t been this complacent in two years

The market hasn’t been priced for the month ahead to be this sleepy in stocks or bonds at any time over the past two years.

One-month implied volatility for the S&P 500 ended last week at a two-year low; the MOVE Index, which tracks the implied volatility for US Treasuries across the yield curve, had only been lower on one day over the past two years: May 22, 2024.

“The Zeroes Are Here,” tweeted Dean Curnutt, CEO and founder of Macro Risk Advisors. “Both the MOVE and 1M SPX implied vol screen in the 0th percentile at the same time right now, looking back the last 2 years.”

Traders were pricing Nvidia’s late-November earnings report as the biggest postelection market event of 2024. Now, they’re not looking for anything in December to shake things up.

“Between now and year’s end, there are simply no real volatility catalysts for the markets to focus on,” Michael Purves, CEO and founder of Tallbacken Capital Advisors, wrote. He doesn’t expect the upcoming CPI report on Wednesday or next week’s Federal Reserve decision to be big market game-changers.

On the other hand… this complacency means something’s gotta happen, right?

“As I have been stressing since right after the election, volatility on most equity options is cheap and should be owned. Now, with the S&P 500 1-month 50-delta put implied vol having moved down below 10, it has gotten historically cheap,” Jeff Jacobson, managing director of equity derivatives at 22V Research, wrote. “The last time it was this inexpensive to hedge an equity portfolio with at-the-money puts was about five years ago from late December 2019 into early January 2020 (I don’t need to remind you what happened shortly after in March of 2020).”