The Smallest Range in 5 Decades Part 2

by LPL Research

On the blog yesterday we broke down how historically tight a range the S&P 500 has been in recently, along with some other interesting stats. As we mentioned at the time, Bloomberg had a very interesting article that noted the S&P 500 was in its tightest 30-day range going back 50 years. Today we will take a closer look at this phenomenon.

Going back the past 30 days, using closing prices only, the S&P 500 has traded in just a 1.54% range. This is the smallest 30-day range since December 1965, which sported a 1.23% range. In other words, the range on the S&P 500 the past 30 days is the smallest in more than 50 years! Things have seemed boring, but that really puts some more color on that lack of action.

083016_Blog_Figure1

Take one more look at the chart above. The past two times we saw tight ranges close to (but not lower than) the past 30 days were late 1993 and early 2007, both of which lead to eventual significant volatility about a year later. Here is where things get tricky, as the late 1990s had volatility to the upside for several years before peaking in 2000, while we all remember the volatility that 2008 brought with it. This tight range by itself tells us nothing about the market direction accompanying the eventual rise in volatility, only that it is coming.

In conclusion, we will end with how we ended the blog yesterday:

What does this all mean? The bottom line is the lack of volatility weā€™ve seen lately is truly historic. It is important to note though that it wonā€™t stay this way forever. Non-volatile times eventually transition to volatile timesā€”this has happened throughout market history and we expect it will continue to happen. Then donā€™t forget that September and October, two of the most volatile months, are on tap. Although we do expect volatitly to heat up later this year, it is important to note this isnā€™t a reason to panicā€”as this volatility is actually perfectly normal.

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IMPORTANT DISCLOSURES

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.

Past performance is no guarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted.

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor

MemberĀ FINRA/SIPC

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Copyright Ā© LPL Research

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