Bitcoin and fantasy football provide excitement when the economy and markets are calm

John Rekenthaler, a columnist with Morningstar.com, noted that the U.S. stock market became increasingly calm in 2017 with moderate daily gains and lack of sharp up-and-down movement. The S&P 500's volatility, expressed by the CBOE's Volatility Index, or VIX, is now at its 10-year lows.

Rekenthaler attributes this calm to the steady but moderate growth of the U.S. and global economies, low inflation, a stable rise in corporate profits and dividends. He notes that during this period ordinary investors find excitement and satisfy their need for gambling in bitcoin trading and fantasy football contests. 

Bitcoin has indeed provided a lot of excitement lately as it has been jumping up and down by up to 50% during the past 30 days.

 

The VIX index chart provides a bit of perspective into what could happen next on the stock market. The index’s lows in early 2007, which were happening on the back of a growing U.S. economy and similar to today’s lows, eventually gave way to a sharp spike in volatility as a collapse in real estate values led to a general financial system crisis of 2008-09. 

The question now is, will this history repeat itself and, if so, what could be a catalyst that could send the stock market for a swoon? Would the market lead the dynamic of the general economy, given that current economic growth could intensify on the back of real tax cuts in the U.S? Or should investors stay on the look-out for a “Black Swan” event that could send markets on a wild ride?

Ukrainian Credit Union Limited