Just How Boring Have Things Been? (Part 1)

by Ryan Detrick, LPL Research

A funny thing happened after the third-largest rally, since 1900, for the Dow from the U.S. election until year-end (+7.8%)ā€”it is now in the midst of the smallest monthly range ever. Thatā€™s right, with the Dow flirting with the big 20,000 level, it has simply stopped moving, up or down, and the daily ranges have been historically small.

Going clear back to 1900, using closing prices, the Dow has traded in a range of only 1.07% over the past month (21 trading days), for the smallest monthly range ever in history. The bottom line is tight ranges donā€™t stay that way forever, and higher volatility sometime later this year is very likely.

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Letā€™s consider another way to look at this: the intraday high-to-low range over the past month (21 trading days) has come in at an all-time low of only 1.42% over the past month (using intraday highs and lows). Going back to 1970, using reliable intraday data, only the summers of 2014 and 2005 were the other times to even see a range less than 2%.

What makes the monthly range so rare for the Dow is it is also happening right near all-time highs. Per Ryan Detrick, Senior Market Strategist, ā€œIncredibly, the Dow has now traded 45 straight days within 1.5% of the all-time high. When you consider the past month has also been the smallest monthly range ever, we have an index that climbed right up to 20,000 and simply froze.ā€

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Tomorrow, we will take a look at what appear to be some historically ā€œboringā€ stats for the S&P 500 and what it could mean for equities.

IMPORTANT DISCLOSURES

Past performance is no guarantee of future results.

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

Indices are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

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.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a nondiversified portfolio. Diversification does not ensure against market risk.

The Dow Jones Industrial Average (DJIA) Index is comprised of U.S.-listed stocks of companies that produce other (nontransportation and nonutility) goods and services. The Dow Jones Industrial Averages are maintained by editors of The Wall Street Journal. While the stock selection process is somewhat subjective, a stock typically is added only if the company has an excellent reputation, demonstrates sustained growth, is of interest to a large number of investors, and accurately represents the market sectors covered by the average. The Dow Jones averages are unique in that they are price weighted; therefore, their component weightings are affected only by changes in the stocksā€™ prices.

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 Advisorā€ØMember FINRA/SIPC

Tracking #1-572770 (Exp. 1/18)

 

Copyright Ā© LPL Research

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