Investors must wake up to risk

Investors have rarely been this relaxed. The Vix index, known as the fear gauge of the US stock market (because it reflects the price of options that investors use to insure their portfolios against sudden swings), recently hit lows not seen since 2007.

Back then, of course, investors were enjoying the calm before the credit-crisis storm. But it’s not just economic turbulence that markets often fail to factor in. As we noted earlier this year, for instance, the Dow had decided by late 1938 that Hitler’s invasion of Austria was no cause for concern.

And today there is a growing list [...]

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