What to watch

Stock market calm: 38 days and counting

Blame it on the summer doldrums or a major bout of investor complacency, but the stock market is undergoing a spell of calm not seen in two years.

The equity market has been virtually void of volatility this summer. The broad Standard & Poor’s 500 stock index has gone 38 trading days without moving up or down 1% or more, Bespoke Investment Group says.

To put the streak of placid trading days in context, since World War II there have been only 34 other streaks with a similar lack of volatility — code word for a dearth of big price price swings. The current streak of calm is the longest since July 2014, when the S&P 500 went 62 trading days without rising or falling more than 1%.

The question is what happens when the calm ends? Does a market hurricane erupt? Or does the market climb higher?

More often than not, streaks without 1% moves end with a down day with a loss of more 1%, Bespoke data show. Of the 34 prior streaks, the S&P 500 ended with a downdraft of 1% or more 24 times, or 70.6% of the time.

Still, the S&P 500 was up 0.15%, on average, a week after the end of the streak, was 0.34% higher a month later and gained 1.58% three months later.

A key stat for bulls is the fact that when the streak has ended with a 1%-plus up day, “returns over the next week, month, and three months are significantly more bullish than they are when the streak ends with a 1%-plus down day.”