Everyone has started using the same word to describe the markets
And there is a growing sense that it might just be too slow, too quiet.
We've now seen a bunch of commentary using the same word to describe the current market mood: complacency.
Here is Rick Frisbie, head of Franklin Templeton Solutions (emphasis added):
"We are definitely positioning to become a little more defensive. We have a saying that "when the CBOE Volatility Index (VIX Index) is low it's time to go"-the VIX is often referred to as the fear index or fear gauge, and when it's at low levels, we think it could be a prudent time to move a little more out of risk assets. Currently, the VIX is trading at about 13, but the 20-year average is just above 20 or 21, so sitting at lower-than-average levels, it means many investors have become less concerned about risk and maybe a bit too complacent."
Here is Joe Amato, chief investment office for equities at Neuberger Berman (emphasis added):
"Given that a lot could happen this fall to reveal how complacent and vulnerable markets have become-from an inflation or rates shock to another twist in the US elections or a geopolitical tire blow-out-investors should make sure their seatbelts are fastened."
Here is Richard Cochinos and Ran Ren at Citigroup (emphasis added):
"A preliminary conclusion suggests markets are in a 5-10% tail - defiantly suggesting complacency is running high."
And here is Athanasios Vamvakidis, Adarsh Sinha, and Yang Chen at Bank of America Merrill Lynch (emphasis added):
"In our view, complacency combined with short vol exposure could set up the market for a highly volatile and correlated sell off on the next shock.
The recurring theme here is that there is likely to be a rocky patch ahead, as some of that complacency is wiped away. Frisbie at Franklin Templeton said that "the world is filled with dislocations," and that "decoupling is likely in different interest-rate regimes and different currency regimes."
He added:
"After being fairly bullish overall in our multi-asset portfolios at Franklin Templeton Solutions, we have retrenched a bit and have taken more of a buckle-up attitude as we move into the fourth quarter, with the US elections and other events happening in the world."