As stocks have climbed to record levels this year, investors are neglecting one very important aspect of financial markets, according to analysts at Bank of America Merrill Lynch.
That aspect is the existence of risk, said Nikolay Angeloff, equity-linked analyst at Bank of America Merrill Lynch, in a note Tuesday. "The market seems to currently imply there is no way a shock can happen," he said.
"We have now recorded 334 days without a 5% or more pullback, the fourth longest period since 1928," Angeloff said. "If it continues at this pace, it will be the least volatile October in history and third least volatile month ever."
The Dow Jones industrial average, S&P 500 and Nasdaq composite are all up at least 14 percent year to date. But the market has been steadily rising in 2017, with volatility being virtually nonexistent.
The CBOE volatility index, or VIX, has traded around historically low levels and has had five straight weeks in which it closed below 10. The VIX measures the market's anticipated volatility over a 30-day period using a range of S&P 500 options.