An eerie kind of calm in the stock market

A RARE calm has settled over the stock market. Whether it turns out to be the one before the storm is a compelling question after a year of conditions so placid that investing has begun to look deceptively simple.

In all of 2017, the Standard & Poor's 500 index experienced no decline greater than 3 per cent, the first time that had happened. And a widely followed volatility index known as the VIX closed below 10 on more than 40 days in a six-month period through late November, according to Citi Research. Before that, the VIX had not closed below 10 on more than six days in any six-month period.

The peaceful trading backdrop helped the S&P 500 rise 19.4 per cent on the year and 6.1 per cent in the fourth quarter. Factoring in dividend payments and appreciation from the reinvestment of those dividends in the constituent companies' stocks, the index returned 6.6 per cent in the quarter and 21.7 per cent throughout 2017. And, despite some rumblings in the bond market, stocks moved even higher in the early days of 2018.