As stock markets keep rallying, markets have become extremely accommodating. For one, S&P 500 stock index has not under gone a 10% or more correction since October, 2011, almost 3 years ago (see, for example, more discussions on 10% or more stock market corrections in July 7, 2014: Portfolio Behavior During Market Corrections). Furthermore, stock volatility has been very muted, as shown by the S&P 500 option implied volatility index VIX in the following chart:
It is thus very easy to be complacent, after all, the last several bear markets have become more and more distant in our memory. We see employment rate is picking up, internet and tech companies are making load of money, U.S. energy sector is booming. What’s not to like?
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