For yet another quarter, stock markets exhibited a lack of volatility. In fact, as the chart below shows, implied volatility of the S&P 500® Index has been below its long-term average for the past five years, going on a sixth in 2017.

Volatility, having been under its long-term average for so long, puts it in rare territory and raises the question of potentially higher market fluctuations going forward. The previous two periods of prolonged low volatility (early 1990s and mid-2000s) ended with diametrically opposed results. The 1990’s period ended with the market melt-up of technology rally in the late 1990s, the other in the mid-2000s ushered in the housing bubble and financial crisis. Both periods of low volatility preceded recessions, but the correlation of those previous low-volatility periods and the onset of the following recession were tenuous at best. Perhaps a better analogy is the period termed “the boring 60s.” That period in the early-to-mid 1960s, not shown on the chart above, featured low volatility, low interest rates, and a stock market that confounded pundits by moving higher for years without a correction.