Even Goldman Sachs CEO Lloyd Blankfein warned Tuesday that the low volatility is worrisome and that it is not a "normal resting state" for markets.
On Tuesday, stocks sold off just slightly after a report that North Korea's ambassador to the U.K. said the country would proceed with its sixth nuclear test. The S&P 500 closed off just 2 points at 2,396. Cashin said it is yet to be seen whether North Korea becomes an event that will return some volatility to the markets.
In the stock market, the VIX, the CBOE's Volatility Index, is trading at a decade low at just around 10. A measure of volatility for the euro is at its lowest level since 2014. In the bond market, rates are quiet and the low volatility is keeping a lid on activity. The volatility is low across markets, but it is lowest in U.S. stocks, experts said.
Arone said one reason for low volatility in equities is that the market is near all-time highs while rates are tame and monetary policy remains easy. He said there was a brief flurry from an inflation scare after the election, but that worry has gone away as oil prices have fallen.
"Earnings are phenomenal," he said. "Populism is waning." He said there was some positive movement forward on Trump's policies last week when the House approved the health-care bill, and it was a positive that Congress avoided a government shutdown when it approved a spending bill. So far, tensions with North Korea have not become a macro event for markets.
"The point is it's not one factor," said Ben Bowler, head of global equity derivatives research at Bank of America Merrill Lynch. "Everybody likes to point to one favorite factor. It's a multitude of factors that are all coming together.
"Most of the factors, I would argue, point back to a relatively sluggish growth environment where central banks still have a heavy hand in supporting markets overall. Some of these effects also have real feedback loops," Bowler said.
The eeriness of the calm in markets is striking after the initial flash of nervousness around the first round of the French election in April. Emmanuel Macron's victory on Sunday eased worries about a wave of far-right populism sweeping across Europe that would threaten the euro zone itself.
"Even when we saw the disruption in markets for Brexit and the election, the market was able to wash these events out of the matrix very quickly," said Dan Deming, managing director at KKM Financial. "Market participants are getting more and more conditioned to fade those moves."
Bowler also pointed to the quick spring-back in markets and noted the phenomena has been going on for the past two years. "This is an incredibly unusual environment, when you look at the behavior of markets, when shocks have no persistence. When any shock is bought and volatility fades," he said.