The U.S. stock market is as calm as can be on the surface, while churning underneath more than it has in decades.
The S&P 500 is so quiet it is almost disconcerting. The index hasn’t had a 5% correction based on closing prices since the end of October; no wonder the new day traders who started buying shares in lockdown think the market only goes up. The last time the S&P was this serene for so long was in 2017, a period of calm that ended with the volatility crash early in 2018—although back then it was even quieter for much longer.
Yet, look at the performance of types of stocks, and they have been swinging around much more than they usually do. Investors have been switching their bets between industries at a pace not seen outside of crises; March brought the biggest gap between the best and worst-performing sectors since 2002.
The link between moves in growth stocks and cheap “value” stocks is the weakest—measured by the correlation—since 1995; investors are using them as proxies for betting for or against economic recovery.
Meanwhile, big and small stocks last moved so independently of each other during the dot-com bubble of 2000, never a reassuring sign.