“The bravest are surely those who have the clearest vision of what is before them, glory and danger alike, and yet notwithstanding, go out to meet it.” – Thucydides

Welcome to the Great Tranquility ladies and gentlemen. Now start getting very afraid.

As Charlie Bilello (Twitter: @CharlieBilello) noted recently, the S&P 500 hasn’t had a 1% intraday move since December 14. This is the longest period of intraday calm…in history.

We went from immense fear over a Donald Trump presidency to historic calm. We went from “America first” to emerging markets far outperforming.  Everything thus far that dominated investor psyche in terms of narrative ended up being quite literally the exact opposite.

Now ask yourself – can this calm behavior in markets continue? Maybe, but volatility is notoriously mean reverting. Combined with high valuations and enormous complacency, we are likely nearing a time of great turbulence ahead, at least for US markets as a secular shift in emerging market leadership begins to take hold (and is long overdue). Amazing how the two overriding beliefs of the Fed hiking rates and a Donald Trump presidency being hurtful for emerging markets has led us to a 9-year low in emerging market high yield credit spreads. So much for that nonsense.

Whatever you think is going to happen, best be prepared for something completely unexpected. In markets, there is a tendency to always react rather than anticipate. “If it ain’t broke, don’t fix it” dominates how investors view their portfolios, chasing past winners and looking at prior returns as an anchor for what to position in. But more often than not, you don’t know if your portfolio is broken until it’s too late. Logic dictates one should prepare for multiple scenarios through diversification and risk management. Unfortunately, few do this. Instead, investors get more optimistic and bullish after a bull run has already happened. Funny how a 30% rise from the February lows last year now makes people positive on stocks.

The point of maximum risk is the point when everyone believes there is no risk. This does not imply an imminent decline. Rather it implies one should manage expectations for what happens next, and plan for alternate scenarios. Don’t get caught up in the euphoria of higher prices. Get excited for lower ones.