Morgan Stanley: "People Have A Hard Time Even Imagining How The Market Could Decline"

A calm complacency never before seen has fallen blanket-like over US equity markets.

"The behavior of volatility has entirely changed since 2014," noted BAML in a a recent note thanks to major central banks keeping interest rates near historic lows (and printed more money than ever before).

As The Wall Street Journal points out, One sign of that: VIX closed below 10 more times last year than any others year in its history, and until today, closed below 10 for the first 5 days of 2018...

As JPMorgan's infamous quant guru Marko Kolanovic wrote, "the first four Fed hikes in a decade have failed to generate the revival of volatilities that many had expected at the end of last year," and a wave of political uncertainty linked to U.S. tensions with North Korea and the new presidential administration also raised the prospect that market tumults could occur with greater frequency... but no...

In fact worse still for The Fed, financial conditions eased as they tightened and vol collapsed to levels never seen before...

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