Traders work the floor at the New York Stock ExchangeANDREW KELLY/Reuters
A long-awaited calm is finally spreading across North American stock markets, giving investors reason to play with equities again and offering underwriters hope that their shelved deals have a chance of getting sold.
On Friday the VIX, a measure of expected market volatility, fell to 12.46, its lowest level since 2007, and both the S&P 500 and the Dow Jones Industrial Average reached highs not seen since the same year.
The moves are optimistic signs for bankers who promised for months that they've got deals lined up – particularly initial public offerings – but simply can't pull the trigger on them because the markets have been much too sketchy.
Now, no one is saying there's an open runway for any and all offerings. The debt ceiling debate still looms in the U.S., and December served as a reminder of just how quickly volatility expectations can spike. As the deadline for the fiscal cliff neared, the value of the VIX nearly doubled from 16 to roughly 23.
But maybe, just maybe, the current calm will persist for just long enough see some action. Republicans are already calling for raising the debt ceiling for three more months, and that could create a financing window.
The downside is that having the right conditions to launch a deal simply isn't enough to forge ahead because investors are sick of getting hosed shortly after they get their stock. What they want now is sustainable growth, and sadly, it's much too early to determine if we've got that.
Tim Kiladze