It's quiet – too quiet: US stocks reach record highs amid low volatility

Volatility on Wall Street has fallen further to hit its lowest level since before the global financial crisis as American indices hit new record highs.

The S&P 500 touched new all-time highs at 2,403.87 points as it opened on Tuesday, while the Nasdaq Composite index rose to 6,133 points.

Becalmed markets around the world are enjoying a period of perceived low political risk after the easy victory of Emmanuel Macron in the French presidential election, which saw the threat of the anti-euro Marine Le Pen recede.

The Vix index, sometimes known as the “fear index” for US stocks, fell to 9.56, its lowest intraday level since December 2006 on Tuesday, according to the Chicago Board Options Exchange (CBOE), which compiles the measure.

The Vix measures the 30-day volatility of stocks traded on the S&P 500, which has seen sustained buying despite a tense political climate. Meanwhile volatility over nine days fell to even lower levels of 9.2.

Volatility levels have spiked over the past year when investors have been confronted by major political turbulence. The Brexit vote in saw the Vix level spike to above 26, while the aftermath of Donald Trump’s election as US President saw the level rise to above 23.

Since then, however, a strengthening US economy and Trump’s supposedly business-friendly policies have boosted the valuations of America’s biggest companies.

Trump’s plans to slash the corporate tax rate would almost certainly lead to higher profits, while investors have seemingly discounted the possibility of damaging trade restrictions after the President’s own Republican party stood in the way of healthcare reform.

Trump had promised massive taxes on imports in an effort to force US companies to bring jobs onshore, which would have dented profits at a diverse range of firms from retailers to manufacturers of products abroad such as Apple.

However, the President’s his tax plan, presented on a single page of paper, did not mention the so-called border adjustments tax. Treasury secretary Steven Mnuchin said the plans for border adjustments were not ready.

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