Where Did Market Volatility Go?

Television and newspapers continue to trumpet every twist and turn of global financial markets. In truth, however, the big story is the uneerie calm that has engulfed virtually every major asset class, from stocks to bonds. Is the whole investment world on Prozac?

Conspiracy theories abound, particularly among the ranks of financial traders, for whom volatility is like wind to a sailor. These traders confidently figure that as long as markets gyrate, no matter what the direction, they can always make money. And, thanks to the rest of us who don’t have the time, information, and skill to match wits with them, they are mostly right. But, with today’s dormant markets, the pickings are slim.

The favored bogeymen of the day are giant government investors, particularly Asian central banks, with their trillions of dollars in assets. These superfunds, whose managers do not necessarily share the same passion for profit as private investors, are said to be squeezing the life out of interest rates and exchange rates. “The big Asian central banks are oppressing us,” one young trader recently complained to me.

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