Ups and downs.

IN 2004, many of the big news stories have been about what didn't happen.

Contrary to widespread concerns, terrorists didn't strike before the Nov. 2. elections, and neither did the lawyers afterward.

Deflation and inflation both failed to derail the world economy. Rising interest rates didn't knock the bond market for a loop.

So it's only fitting that volatility--the frenetic fluctuations that seemed to have become a standard feature of modern stock-market life--did an abrupt vanishing act as well. After a nine-year run of two-digit swings, the Standard & Poor's 500 Index has shown only single-digit changes all through 2004.

Since 1995, the index's annual percentage changes have been up 34, up 20, up 31, up 27, up 19, down 10, down 13, down 23 and up 26. Dating back to 1944, the index has had only 17 years in which it rose or fell less than 10 percent.

Some "quiet" years are quieter than others. In 1987, which wound up with a 2 percent net gain in the S&P 500, stock prices ran up in the first eight months of the year, then crashed in October.

This year, at no point through late November has the index shown a net change of 10 percent from Dec. 31,2003. Even if the index rises to a net gain of 10 percent by the end of December, the year will go into the books as the least volatile in a decade.

No past calm stretch has lasted more than two or three years. As a result, many people have come to count on volatility as a constant. But like most assumptions in the markets, it's not a safe one.

Volatility's most notable new constituency is the rapidly growing hedge-fund industry, many of whose members invest in "long-short" style. The idea is to reap a reward, known in the trade as "alpha," no matter which way markets are moving.

For an ample supply of alpha, it helps to have plenty of volatility. And that's where a low-volatility environment like the stock market in 2004 raises some provocative questions. As more and more hedge funds go in quest of alpha, are they in danger of hunting it to extinction? By seeking to capitalize on volatility, could they cause at least some of that volatility to disappear?.

One set of hedge-fund performance measures, the Van Hedge Fund Indexes, shows an average return of 3.3 percent for the first 10 months of 2004. That lags a bit behind the average gain of 3.4 percent over the same stretch for all U.S. mutual funds tracked by Bloomberg.

It can't be a good sign for hedge funds if mutual funds beat them during a period when the stock and bond markets haven't made much progress. By rights, those conditions ought to favor hedge funds.

Markets are famous for refusing to provide what the majority wants from them. When everyone is bullish, for instance, prices may be ripe for a decline. So when more investors seek to profit from volatility, it would be very much in character for markets to turn less volatile.

In the great scheme of things, there is much good that can come from lower volatility- including better sleep at night for the typical buy-and-hold investor. For those who make a living from market turbulence, though, it might be cause for bad dreams.