This morning the Russell 2000, a small-cap index, is leading the S&P 500 and DJIA up 2.5% in a broad based stock rally. The US Dollar Index is down over 1% and US 10-year bond yields are up 11 basis points to 1.58%. And the VIX is down  nearly 7% to 16.35. By all measures traders today are buying risky assets and selling their defensive positions, except when you look to Switzerland. Despite a global “risk-on” rally, investors continue to pile into Swiss 2-year bonds, pushing their nominal yield to all time lows of -0.454%. This is an extremely defensive trade that would only be put on in the face of extreme uncertainty and fear of downside risk.

So who is right – Swiss bonds or US equities? In this news driven environment, it is impossible to know with certainty so we encourage investors to take advantage of today’s low VIX to buy out of the money $SPY puts. These are cheap insurance against the next headline out of Europe and do not limit upside gains in stocks.