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Global Outlook

Atlantic City

August 14, 2014, Thursday, 21:58 GMT | 16:58 EST | 02:28 IST | 04:58 SGT
Contributed by eResearch

Given all that is happening in the world, from Russia/Ukraine to Israel/Gaza to a possible Ebola pandemic, you would think that there would be some, any, fear in the market.

But, alas, the VIX, the Chicago Board Option Exchange’s measure of volatility or fear in the market, hovers below 15. The chart below illustrates just how low this is in a historical context.

Well with Monday’s “relief rally” - yes, I heard that multiple times from the talking heads - the VIX remained lower, even with a late day pullback in the S&P.

But stocks were mostly higher and, of course, the reason was more of the same. Stanley Fischer gave one of his first major speeches today in Sweden since becoming the number two man at the Fed. While his stance has been debated, it seemed pretty clear that he is in lock step with Janet and company.

" With few exceptions, growth in the advanced economies has under-performed expectations of growth as economies exited from recession,” said Fischer in his speech titled ”The Great Recession: Moving Ahead.” "Year after year, we have had to explain from mid-year on why the global growth rate has been lower than predicted as little as two quarters back. Indeed, research done by my colleagues at the Federal Reserve comparing previous cases of severe recessions suggests that, even conditional on the depth and duration of the Great Recession and its association with a banking and financial crisis, the recoveries in the advanced economies have been well below average."

Fischer went on to articulate his worries about the tightening labor supply:

"The considerable slowdown in the growth rate of labor supply observed over the past decade is a source of concern for the prospects of U.S. output growth," he said. "There has been a steady decrease in the labor force participation rate since 2000. Although this reduction in labor supply largely reflects demographic factors — such as the aging of the population — participation has fallen more than many observers expected and the interpretation of these movements remains subject to considerable uncertainty.”

The doves are in control and neither political unrest, nor war, nor famine will keep them from flying this market higher.