Beneath Markets’ Calm Are Signs of Growing Investor Caution<br />While the VIX rose nearly 9 percent on Wednesday after President Trump’s comments, it continues to trade at historically low levels, and many investors continue to wager<br />that lots of money pouring into markets and an improving global economy will keep the index quiescent.<br />What is driving this anomaly, some say, is a recognition<br />that eventually investors will no longer be able to ignore recent headline risks — be it nuclear tensions with North Korea, a trade war with China or a debt ceiling crisis in Washington.<br />“But we do think that there are risks in the world that are not being priced in.”<br />To Mr. Koesterich’s point, some of the best-performing investments in the world this year have been exchange-traded vehicles<br />that investors can use to bet against the VIX, the Chicago Board Options Exchange Volatility Index, better known as Wall Street’s fear gauge.<br />“There has been a Pavlovian response by investors to disregard any piece of bad news or any spike in volatility — and<br />that has been a very profitable strategy,” said Russ Koesterich, a portfolio manager for BlackRock’s $39 billion Global Allocation Fund.<br />“Gold can help especially if the dollar is not a safe haven anymore,” Mr. Koesterich said,<br />referring to how the dollar has weakened in response to the spate of news from Washington.<br />Since the beginning of the year, he has been adding to his gold position,<br />and it is now the Global Allocation Fund’s second-largest position, according to Y Charts.
