A strong rally in U.S. stocks has pushed Wall Street's most widely watched risk barometer close to multiyear lows in a sign investors are growing increasingly complacent as equity indices test fresh record highs.
The CBOE Vix index, a gauge of the price traders are prepared to pay to protect against volatility in the U.S. stock market, has dipped more than 40 per cent since late June and neared pre-financial crisis levels by the start of the week.
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The combination of strong earnings, an increase in the flow of money into investment funds, improving economic data and limited trading activity during the U.S. summer season have set conditions for stocks to rise.
Reassurance from the U.S. Federal Reserve that interest rates would remain in place even as the central bank begins to taper its stimulus efforts also added to the positive sentiment.
The Vix, known as Wall Street's fear gauge, moves lower when investors are more relaxed and touched its lowest level since March at 11.84 on Monday as the S&P 500 closed at a new record.