Traders are gearing up for a pickup in volatility following an unusually sleepy stretch for the stock market.
The gap between the S&P 500’s daily peak and trough narrowed to 0.62 percentage point in June. That was down from 0.98 percentage point in May, marking the lowest level of intraday volatility within a month since December 2019, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
After a notably quiet stretch, many analysts are anticipating a break in the lull. The simplest reason: Trading desks tend to become more lightly staffed during the summer as employees take off for the holidays. That generally means there is less liquidity in the markets.
In turn, any surprising economic data, corporate news or monetary-policy news tends to “hit the market harder than they otherwise might,” said Nicholas Colas, co-founder of DataTrek Research, in an emailed note.
“And since volatility and returns have a negative correlation, this dynamic can make for difficult investment environments,” Mr. Colas said.