The stock market has done virtually nothing this week. Why it's a good thing

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Being called boring is almost never a compliment. For investors, it's a dream come true.

The action of the market last week is certainly unrolled without incident. The Dow Jones Industrial Average index gained 147.24 points, or 0.6%, to close at 26,559.54 points, while the S & P 500 index lost 0.1% to 2905 , 03 points and that the Nasdaq Composite gained 0.2% to 7998.06. It was really that yawning-inducing.

But boring, it's beautiful. The excitation leads to large market fluctuations, one way or the other. Hopes of an economic recovery in early 2018 helped boost equities, but fears of overheating inflation prompted the first correction of the S & P 500 in about two years. Fears of an impending recession caused panicked sales in December and caused investors to wonder what had happened.

But after the start of the year 2019, the markets have calmed down. The Dow lost 28 points on Monday, 68 points on Tuesday and three points on Wednesday. It's so quiet that the Cboe volatility index, or VIX, has fallen below 13, and if some would say it proves a lack of fear, it probably reflects the little movement in the market every day.

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And for a good reason. If market volatility is a reflection of uncertainty – good or bad – there is very little left for the moment. Consider recent economic data. Unemployment claims remain at their lowest level since 1969 and retail sales rebounded in March, but they were not good enough to suggest that the economy is overheating. In fact, the Conference Board's Leading Economic Indicator Index rose 0.4% in March, meaning the US economy is expected to grow about 2% in 2019, the research group said.

It's not just about the United States. Many optimists announce a rebound in China's economic growth as politicians work to boost the world's second-largest economy. But this stimulus is not like previous attempts to grow, said Charles Shriver, portfolio manager at T. Rowe Price. He notes that current stimulus measures are less focused on fixed investment and more on Chinese consumers, such as a recent reduction in the country's value added tax. It also means that this stimulus will be less effective than the previous ones. "They are looking to stabilize rather than witness a significant acceleration of growth," Shriver said. "He should be supportive, but not so favorable."

And that means everything could happen two. The economy is growing not only at around 2%, but inflation is also close to 2% and the federal funds rate does not exceed 2%, says Torsten Sløk, Chief Economist at Deutsche Bank. He sees little reason for this to change, not even with Brexit or US and foreign elections. This means that stocks can continue to benefit from an environment neither too hot nor too cold.

"Boring is good because boredom does not mean unmanageable uncertainty," he says. "In this context of no recession and stable growth, low inflation and low rates, risk assets, especially equities, are optimistic."

Of course, the fact that the indices are calm does not mean that there is no chaos under the surface, as any investor in the health sector says. The health sector SPDR exchange-traded fund (symbol: XLV) fell 4.3% last week, clearly due to concern over the growing popularity of Medicare for All. This fall may push investors out of defensive growth stocks, where health care accounts for 57% of the universe, in favor of cyclical growth stocks, says Thomas Lee, head of research at Fundstrat, and the same trend could reoccur universe as well.

If such a rotation occurs, Lee expects a little sales pressure to bring down the overall market. "If a rotation is going on, which we think has a high probability, it's negative for short-term stocks," he writes.

And then it's boring again.

Write to Ben Levisohn at [email protected]