Where in the world is volatility?

I’m a little obsessed with volatility lately – well, the lack of it actually.  The VIX has been hovering around 12 for months despite emerging markets turmoil, rigging scandals and regulatory environment that can only be described as volatile. How can volatility be so low in a market where complexity and uncertainty are so high?
Source: Yahoo! Finance
Source: Yahoo! Finance

Calm markets aren’t a bad thing for everyone. Long only, buy and hold investors have done quite well in this docile equities bull market since 2009. The few volatility spikes we’ve had have been fixed income related – interest rate increase speculation and the US debt downgrade – which over time only help the equities market. US equity passive index fund holder are sitting pretty in this low volatility environment (despite the market structure debate ongoing that says otherwise). A look up at CNBC as I write this post (on May 27, 2014) shows the Dow near record highs.

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