So much for 2018 being different than 2017. Anyone who expected the new year to bring about a new market environment has been sorely mistaken. The year is still extremely young and anything can happen in the coming months―but at least through the first week of 2018, almost nothing has changed in the financial markets.
If anything, the trends from last year have been even more pronounced so far this year. Consider:
1. The S&P 500 has risen every day so far in 2018―five sessions in a row―and hit an all-time high of almost 2,749 on Monday. The market has rallied so fast this year that it’s already exceeded the 2018 targets of about a quarter of Wall Street analysts, according to Bloomberg.
After a mere five sessions, the iShares Core S&P 500 ETF (IVV) is up 2.6% this year, on top of last year’s 21.2%. The fund remains a hit with ETF investors, pulling in $1 billion in its first week after seeing inflows of $30.2 billion in 2017.
2. Volatility remains exceedingly low. The Cboe Volatility Index hasn’t closed a single session above 10 so far this year, and even fell as low as 8.92 during the past week.
Inverse-volatility ETFs, such as the VelocityShares Daily Inverse VIX Short-Term ETN (XIV) and the ProShares Short VIX Short-Term Futures ETF (SVXY) continue to clean up. Both funds are up 7.2% so far this year after spiking more than 182% in 2017.
3. The cryptocurrency craze reached a new fever pitch early this year. The total market capitalization of all cryptocurrencies reached as high as $836 billion on Sunday, according to coinmarketcap.com, up from $616 billion at the end of last year.
One surging cryptocurrency, Ripple, came out of nowhere to reach a market cap of nearly $150 billion, up more than 15-fold from where it stood only a month ago. The most famous digital currency, bitcoin, has held its ground so far in 2018, fluctuating around $15,000 ahead of the potential launch of the first-ever U.S.-listed bitcoin ETF later this year. More than 10 proposals for bitcoin funds are currently before U.S. regulators, according to Cboe, parent company of ETF.com.
4. Short-term bond yields are still moving up faster than long-term yields. As of this writing, the 10-year Treasury yield is up 0.07% on the year to last trade at 2.48%. Meanwhile, the two-year yield is up 0.08% to last trade at 1.96%.
Granted, that’s not a big difference, but it maintains the trend of a flattening yield curve that was observed all of last year.
5. ETF inflows continue gangbusters. Through four trading sessions, U.S.-listed ETFs took in nearly $10 billion, or an average of $2.5 billion per day, according to FactSet data. That’s more than the $1.9 billion ETFs took in on average in 2017, a year that ended up with record inflows of $476.1 billion.
Retail investors may be fueling the latest stampede into ETFs. According to a measure of investor sentiment derived from client holdings at TD Ameritrade, retail investors are as bullish on stocks as they have ever been.