Investors rediscover the risks to holding stocks

Central bankers are often accused of dulling investors' sensitivity to risks with ultra-easy monetary policy. That would explain why global equities have risen despite risks facing the

world economy, and why expectations of U.S. stock-price volatility recently seemed to be falling. Still, there are welcome signs that investors have rediscovered their risk radar. The MSCI

All Country World Index has risen 15 percent from its February lows while the VIX , an index measuring expectations of near-term equity volatility, has fallen to 13.84, towards the bottom of

the past two years' trading range. But other market signals show money managers are far from complacent in the face of downward revisions to earnings growth forecasts and the sort of

risks identified by the International Monetary Fund, such as China's slowdown and persistent weakness in developed economies. First, investors are betting equity volatility will rise.

Societe Generale analysts point out that investors have the most marked preference for options to buy rather than sell the VIX since August 2015 - a period of extreme market turmoil. The

same message comes from VIX futures, gauges of how the index is expected to behave in the months ahead. The difference between the six-month future, which is currently 20.18, and the VIX has

for some time been at its widest since 2013. More from Breakingviews : Millennial media run into age-old problems Second, there are shifts in the so-called equity risk premium that measures

the appeal of stocks relative to benchmark government bonds, which are usually safer and less volatile assets. For global stock markets, this premium has risen to 4.8 percent, a fifth above

the post-1990 average, from levels around 4.5 percent earlier this year, according to Societe Generale calculations. The further this measure moves above its long-term average, the cheaper

equities are relative to bonds. It's perfectly possible for such nerviness to coexist for a while with rising stock markets. After all, reports such as purchasing managers' surveys

show major economies are still growing. But the more investors unshackle themselves from central bankers' influence, the less immune global stocks will be to any bad news. The ride may

be choppier but this is probably a price worth paying for less distorted markets. For more independent commentary and analysis from Reuters Breakingviews, visit breakingviews.com