Global stock markets are once again on the brink of record highs, but analysts say alarm bells are ringing as volumes in the markets are low and show no sign of bottoming out.
U.S. equity indices hit record highs last week and looked set to advance their gains on Monday as the Dow Jones Industrial Average rose to an intraday record.
In Europe, meanwhile, stocks also started the week on a positive note amid thin trading due to public holidays in Germany and France. The MSCI All Country World Index, which tracks equity markets across 45 countries, was higher on Monday at 426.77, just shy of its record high of 428.63 hit in 2007.
But even as the bull run continues - supported by data pointing to an economic recovery in the U.S. and Europe, along with loose monetary policy - traders are grumbling about the lack of price volatility and low trading volumes, which they say make it difficult to detect investor mood.
During the financial crisis, U.S. equity volumes traded at around 9 billion shares a day, according to ConvergEx Group Chief Market Strategist Nicholas Colas. Now, around 5 billion shares a day are being traded.
Colas warned that a further 20 percent drop in volume from current levels "wouldn't be impossible".
"Things are dull, and that's a bad thing for financial professionals who are always looking for the next big thing. Wall Street needs volatility to get paid for its ideas," he said.
Small volumes are also adding to low equity market volatility, which has dropped to levels not seen since 2007.
The BofA Merrill Lynch Market Risk Index, which measures implied volatility across asset classes including rates, currencies, and commodities, is trading at minus 1.17, not far off the lows seen in 2007 before a significant spike above the 3.5 mark in 2008.
Meanwhile, the CBOE Volatility Index (VIX), another measure of investor uncertainty, fell to its lowest level since February 2007 on Friday.
Ava Trade's Chief Market Analyst Naeem Aslam said low volumes on any move higher should be "considered as a caution" and gives rise to questions about who is driving the price up, and what will happen when monetary easing from the U.S. Federal Reserve is reduced further.
As equity markets trade around levels not seen since before the global financial crisis in 2008, a number of economists have warned that a correction could be on the way.
Colas, however, shrugged off fears of an imminent bubble.
"Most of the recent commentary on stock prices highlights the risks of another bubble. I am sympathetic to the idea, but it feels premature to call out the current state of U.S. equity markets as profoundly overvalued," he added.