Investors buy downside protection as VIX hits five-year low

Global asset allocators are urging investors to look past the VIX index's fall to a five-year low last week, and shield assets against a further bout of volatility in the coming months.

The VIX, commonly dubbed the ‘fear index’ for its inverse relationship to the S&P 500, has fallen 71% over the past year as investors adopt a more sanguine attitude towards the eurozone crisis. Over the past two months, global equity markets across the board have posted solid gains, with contagion fears in Europe easing in response to proposed bond-buying by the European Central Bank. ECB President Mario Draghi vowed last month to do ‘whatever it takes’ to save the euro. However, global strategists have warned the pattern of the VIX indicates the summer rally is unsustainable and inve...