After lull, Wall Street eyes volatility gains as risks build

Wall Street is set to close one of its calmest quarters in nearly six years, and the lull after a volatile start to 2025 has many market participants increasingly alert for renewed market gyrations.

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American flags are displayed on screens at the New York Stock Exchange. For the third quarter, the S&P 500's one-month volatility -- a gauge of the index's monthly price swings -- averaged 10.8, the lowest for any quarter since the three months ended December 2019.

(REUTERS FILE)

For the third quarter, the S&P 500’s one-month volatility — a gauge of the index’s monthly price swings — averaged 10.8, the lowest for any quarter since the three months ended December 2019.

The stock market has climbed relentlessly to record highs as investors boosted equity exposure after April's tariff-related selloff, and Wall Street enjoyed a lack of new negative shocks. This crushed volatility. With the measure of market fear near historic lows, investors are growing wary that a spike could be close.

“There's a natural floor for volatility. It doesn’t go to zero,” Matt Thompson co-portfolio manager at boutique investment firm Little Harbor Advisors, said.

“We know where we are in the larger volatility cycle, so the next move for volatility is almost guaranteed to be higher at some point,” he said.

On Monday, the S&P 500 and the tech-heavy Nasdaq composite index both closed not far from the respective record highs.