London — After this week’s war of words between the US and North Korea triggered the biggest fall in global stocks since the US presidential election, investors are wondering what other off-radar shocks may be waiting to rock world markets. Although there is little sign so far that investors are protecting themselves against a major sell-off, some say the current environment masks latent risks. "Every day, our risk models tell us to take more risk because of falling volatility but with markets being where they are, we have to be very careful in not following them blindly," said James Kwok, head of currency management at Amundi in London. "So we try to project scenarios on what can go wrong and where are markets not looking." Such has been the extraordinary period of stability in financial markets in recent years that world stocks have hit a series of record highs while gauges of broad market volatility have plunged to record lows. That benign investment environment has been fostered...
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