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Last Thursday’s 274-point drop in the Dow Jones Industrial Average, a mere 1.2% trim, was treated by the media with the fanfare that in previous times might have been reserved for at least a mini one-day crash.

But given how calmly markets have traded in recent months, it’s perhaps understandable why market observers might have lost perspective.

A Sunday piece in the New York Times supplies the numbers to illustrate just how tranquil the stock market has been in recent months, even against a backdrop of war talk out of North Korea and the never-ending infighting in the White House.

Jeff Sommer, a veteran editor with the Times, writes that the U.S. stock market has moved in its tightest range since 1965, though the small daily movements have fortunately trended to the upside.

Sommer quotes Ryan Detrick, a senior market strategist for LPL Financial, who has found that the Standard & Poor’s 500 has not had a 5% decline, from peak to trough, since June 28, 2016. “That sell-off, 6.1 percent over several days, occurred after Britain’s surprise vote on June 23, 2016, to leave the European Union,” he adds.

Moreover, other measurements supplied by LPL Financial’s Detrick show the same pattern. “For the three weeks through Aug. 10, the closing levels of the S&P 500 never had a daily swing of more than 0.3%, never happened before in the history of the S.&P. 500.” And for 2017 so far, the average daily trading range has been 0.55%, the lowest ever.

But then Sommer’s piece moves quickly from the factual to the speculative. His main point is that the stock market’s period of tranquility is “bound to end.”

To which anyone might conclude, “Well, of course, it’s bound to end.” The question is: how soon?
Sommer, like all other market observers, doesn’t have the answers, nor should he. In fact, he’s profoundly unsure just where markets are heading, as this bit of writing makes clear.

“One of these days, these various streaks will end. A big stock market decline could well precede and predict a recession,” Sommer concludes. “But barring a disastrous geopolitical, economic or financial shock — there are plenty of possibilities, take your pick — it is likely that both the bull market and the economic recovery will keep grinding on for a while. But don’t count on it. We are pushing our luck. Even if you believe in magic, the markets rarely stay calm and buoyant for such an exceedingly long time.”

While no one should turn to journalists for forecasting advice, the same applies to highly-celebrated hedge-fund managers.

In his latest written commentary, Ray Dalio, the chairman and chief investment officer of Bridgewater Associates, puts investing aside to mount a political soapbox.

Dalio asserts that “politics will probably play a greater role in affecting markets than we have experienced any time before in our lifetimes but in a manner that is broadly similar to 1937.”

Dalio writes that “history has shown that democracies are healthy when the principles that bind people are stronger than those that divide them, when the rule of law governs disputes, and when compromises are made for the good of the whole—and that democracies are threatened when the principles that divide people are more strongly held than those that bind them and when divided people are more inclined to fight than work to resolve their differences.

Conflicts have now intensified to the point that fighting to the death is probably more likely than reconciliation.”

He adds: “While I see no important economic risks on the horizon, I am concerned about growing internal and external conflict leading to impaired government efficiency (e.g. inabilities to pass legislation and set policies) and other conflicts.”

The problem is that Dalio’s political essay leaves investors to guess what the current state of affairs might mean for them.

Does political instability trump an economy with “no important” economic risks?

Dalio doesn’t answer this question, so we might have to watch how it plays out in real life.