Daily return correlation of top 10 US stocks by market cap in the last yearNTTP6 min read·Just nowJust now--Press enter or click to view image in full sizeA cap, but not a market cap . Photo by NATHAN MULLET on UnsplashThe motivation for this article is from another Medium author explaining the pile up of wealth at the top of the stock market and the potential trouble therefrom when the (AI?) bubble bursts. This article shows that the problem is worse than he mentioned, because the top assets in the market ...

Core Insights - The S&P 500's historically low volatility may mask a fragile market setup that could change rapidly if correlations between stocks increase [1][4][6] - Bank of America identifies a "coiled spring" effect, where low index volatility contrasts with normal single-stock volatility, indicating potential for sudden market shifts [2][5] Volatility Analysis - The S&P 500's three-month realized volatility is approximately 8.5%, placing it in the bottom 10% of readings since 1990, suggesting a calm market [2][4] - Despite low index volatility, individual stocks are experiencing normal volatility levels, indicating that they are not moving in the same direction [5][6] Market Sensitivity - The current low correlation among stocks is a key factor in maintaining low index volatility; any increase in correlation could lead to significant market volatility [6][7] - Bank of America warns that the market is highly sensitive to correlation changes, with little room for further decreases in correlation [6] Potential Triggers - Political instability in France is highlighted as a potential trigger for market volatility, despite the focus on U.S. economic data and earnings [8]