Slipping away

Yesterday, the S&P 500, proxy for the entire U.S. stock market, touched an intraday all-time high of 7,816.70. 

For context, the index, cap-weighted and formulaically divvied up into a point score, debuted in March 1957 — and did not hit 100 until June 1968. It wasn’t until nearly three decades later, in February 1998, that the index first crossed 1,000. 

Subsequent milestones were reached in incrementally shorter time frames. It took another 16 years for the 2,000 mark to be reached.

The 3,000 mark was hit in 2019. Two years (and a global pandemic) later, the index hit 4,000.

Earlier this year, in Q1, the S&P’s ever-upward trajectory looked particularly vulnerable after three straight years of gains. 

The outbreak of war and an accompanying energy shock rattled investors and the index fell below 6,400.

Not only did the index recoup those early March losses but it catapulted to new record levels on the back of uniformly strong corporate earnings.

Lofty though it may be, the S&P 500 is looking unusually expensive.

Pick a measuring stick. We'll use the Cyclically Adjusted Price-to-Earnings ratio. Created by Nobel laureate Robert Shiller, the "CAPE" divides a stock index's price by the average of ten years of earnings, adjusted for inflation. 

The historical long-term average for the CAPE (also known as the "Shiller P/E ratio") on the S&P 500 is 17.4.

Right now, the S&P 500 is trading at a CAPE multiple of 42, which is the highest level since the dotcom era of 1999-2000. 

Bitcoin began the week above $65,000. Slowly, steadily, that mark has faded from view. As of Friday at 10:25 a.m. (EST), the largest crypto was struggling to stay at $62.6K after a 1.8% decline over the past 24 hours.

Slipping too is the BVIV, which is BTC’s 30-day implied volatility index (and not to be confused with BVI Vodka, a premium spirit found in the British Virgin Islands).

The volatility index has slid to a yearly low near 36%, according to TradingView. 

Wall Street’s so-called “fear gauge,” the VIX index, tracks volatility in the S&P 500. And it too has fallen to its lowest level since January.  “Even gold and oil volatility indexes are falling,” CoinDesk pointed out.

A low-volatility environment across the board — in a time of war and stubborn inflation — could be seen by trend-follower types as a reassuring beacon of prevailing calmness. But to a contrarian, such eerily synched up serenity smacks of a volatility spike just around the bend. 

Which likely means that some shrewd traders are right this minute positioning for a major hiccup. “The tape will prove who's right,” CoinDesk said.

Today’s SEC open meeting to consider new crypto rules has been canceled due to “an unforeseen scheduling issue,” an agency spokesman told Reuters. No replacement date has been set for the meeting.

This actually isn’t a particularly debilitating setback, at least not in comparison to the increasingly uncertain fate of the CLARITY Act, a bipartisan bill that would give the crypto industry the kind of broad, formalized regulatory framework for which it has been clamoring.

The Senate had a window this summer to pass the bill but even a first-step procedural vote (to move forward quickly) was postponed until mid-September. 

With midterm elections set for November, lawmakers are toiling in the shadow of a towering hourglass that contains only so much sand. Meanwhile, some Democrats are feeling pressure to take a no-go stand on an issue that has become somewhat more controversial of late, in part because of President Trump’s ties to the crypto sector.

Rules could come in drips and drabs but come they will, eventually, experts agree. The SEC is already working on an “innovation exemption” that would let firms “experiment with blockchain-based stocks and similar products without meeting every SEC disclosure requirement,” said The Block.

Next Thursday, the Commodity Futures Trading Commission is set to stage an inaugural meeting of its Innovation Advisory Committee. The first item on the agenda is a session titled "Crypto's Regulatory Evolution: From Uncertainty to Clarity.” Other sessions will cover artificial intelligence and prediction markets.

As Decrypt noted, the CFTC’s IAC is an advisory entity, and will produce merely recommendations for rules, as opposed to actual rules themselves.