Stocks rest in June after the biggest quarterly return of the last 10 years

The S&P 500 gained 0.2% in May and is now up 3.2% on the year.  Stocks gained 15.9% in Q2, the best quarterly result since 1998.  From the low on March 9th through quarter end, stocks generated gains of 36.9%, one of the steepest rallies of the last 80 years.

As volatility continues to drop, now below the level of September 12th right before the banking system seized up, we have some time to pause and reflect about how the financial system will evolve to prevent futures crises, or at least until bankers and investors forget the lessons learned from this crisis, typically in half a generation.

We have observed over time that accidents never happen because just one thing goes wrong.  Instead a number of things have to go wrong simultaneously, often confounding received wisdom about how things should be.  One of the most famous "accidents" of all time was the sinking of the Titanic, a supposedly "unsinkable" ocean liner that was destroyed on her maiden voyage.  A little tour through history will shed some guidance on current events.