For years this newspaper has been reporting financial markets as a rollercoaster. It was refreshing, then, to find the summer ushered in with a series of stories about how low volatility had become by early June. Yet the general tone in the financial press has been far from soothing. “It’s quiet . . . too quiet”, goes the refrain, followed by the pointed observation that the last time volatility was so low, it was just before the financial crisis began.
There is a commonsense alternative to the idea that this must be the calm before the storm: it’s that no news is good news. So which view is right? Should we treat low volatility as an eerie portent of disaster in the making, or as a sign that the world economy is finally on the right track?
The answer to the question depends on whether we look at financial markets, or at the real economy of goods and services, production and investment.