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By David Berman

For a raging bull market, things sure are quiet out there.

The Dow Jones industrial average notched its fifth straight gain on Tuesday, re-conquering the 13,000-point level and hitting its highest level since December, 2007. The tech-heavy Nasdaq composite index blasted above 3,000 and is now at its highest level since 2000.

These are impressive milestones, to be sure. But a striking number of investors are giving the good times a wide berth.

According to Bloomberg News, recent U.S. stock trading volume has fallen to its lowest level since at least 2008, suggesting there might be a lack of conviction among many investors.

Daily moves within the market also seem muted by recent standards. Tuesday's 1.7-per-cent gain by the Dow represents its second-biggest jump of the year, but would hardly have caused eyebrows to flutter last year.

Meanwhile, the CBOE volatility index is reflecting a state of complacency. The so-called “fear gauge,” which tends to reflect investor anxiety, has pretty much fallen asleep. It fell below 14 early on Tuesday, close to a five-year low and a sharp dive from a level of 45 as recently as October.

If no one is fearful, few are excited either. Stock market strategists, normally a bullish breed, remain cautious in their targets for the S&P 500 and continue to recommend a relatively defensive asset mix, on average.

Many factors are driving stock market gains, including a rebound in financial stocks. U.S. banks jumped on Tuesday after JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) passed the Federal Reserve's stress tests of their ability to withstand financial shocks.

The economic backdrop also looks promising. U.S. retail sales rose 1.1 per cent in February, impressing observers who noted that it could drive first-quarter economic growth estimates higher.

“A pickup in ‘core' sales [that exclude things like cars and gasoline] would suggest that consumer spending growth is entering a more broad-based, self-sustainable phase of the recovery,” Chris Jones, an economist at Toronto-Dominion Bank, said in a note.

And on Friday, the Labor Department reported a solid gain in U.S. payrolls for February, which supported the view that the country's employment situation is also making headway.

The U.S. Federal Reserve Board acknowledged the improving economic conditions in its monetary policy statement on Tuesday, giving investors the best of both worlds: The economy is getting better but the central bank says it will continue to stimulate it anyway with ultra-low interest rates through 2014.

So why haven't markets been swept up in a wave of euphoria that would be reflected in rising trading volumes?

Bearish observers argue that U.S. economic improvements, while impressive, are lagging indicators that don't say much about what's coming. Lakshman Achuthan, co-founder of the Economic Cycle Research Institute in New York and one of the more accurate economic forecasters in recent years, is among the skeptics who argue that leading indicators continue to point to an oncoming recession.

As well, Europe remains a wild card, and not only because its own recession is looming.

Greece has secured another bailout and avoided a messy default on its debt obligations, but few observers believe that Europe's sovereign-debt crisis has been solved.

The yield on Spain's government bonds remains high, indicating continuing nervousness about the country's ability to rein in its deficits without sinking into a deeper economic hole.

As for the stock market's recent milestones, there's a catch: The S&P 500 doubled from its bear market lows in 2009 until last April, but has since gained a mere 3 per cent after overcoming last year's steep correction.

Low trading volumes suggest that many investors have concluded that while there's no reason to flee the market, there's no reason to embrace it either. They believe the market's big gains are in the past, not the future.

Source: Bull Market? Investors Aren't So Sure