One bullish indicator for stocks just reached a record

US Republicans just passed controversial healthcare legislation. France just elected a new president. Yet equity investors have never been this calm.

Expected price swings in the S&P 500 are at a record low, which implies a lack of nervousness and is generally viewed as a bullish signal for the stock market.

Why such a muted response to two seemingly major geopolitical developments? US investors are simply focusing on other, more relevant market drivers — and they like what they see, according to Credit Suisse.

“The principal macro factors reining in S&P short-dated implied volatility are a weaker US dollar and better than expected corporate earnings,” Credit Suisse derivatives strategist Mandy Xu wrote in a client note.

There’s no denying it’s been a blockbuster earnings season, which is helping drive bullishness. Results so far are showing that S&P 500 earnings grew 13% in the first quarter, the index’s fastest year-over-year growth since the third quarter of 2011, according to Goldman Sachs data.

About 50% of firms have beaten EPS forecasts, above the long-term average of 46%. Further, 41% of companies have exceeded revenue estimates, the most positive ratio of surprises in almost six years, the Goldman data show.

A weaker dollar has also contributed to investor optimism. The US Dollar Index has fallen to the lowest since right after the US presidential election, down 4.5% from a 14-year high reached on December 28. A weak greenback generally translates to higher profits on exports, something that helps the many mega-cap US firms that sell products overseas and dominate stock indexes.

The lack of concern amongst US equity investors can also be seen in the CBOE Volatility Index, or VIX, a 30-day barometer of investor nervousness calculated using multiple S&P 500 options. The so-called fear gauge slipped last week to its lowest since February 2007.

On Friday, one-month implied volatility on the S&P 500 fell to the lowest on record, according to data compiled by Bloomberg.