Risk appetite wanes
Investors avoided riskier assets on rates, trade jitters.
- There was some variation in risk appetite with U.S. risky assets broadly outperforming
- Emerging market assets weakened as the United States raised interest rates
- Japan and eurozone bonds were relatively insulated, especially if they were currency hedged
This 10-year illustration captures the cyclicality of investors’ appetite for risk.
With Lehman Brothers’ bankruptcy and the onset of the global financial crisis, appetite for risk all but disappears.
Eruption and subsequent clearing of concerns over EU sovereign debt crisis, U.S. debt ceiling, and fear of China hard landing drive major risk selloff and rally.
March ’16–Jan ’18
Risk assets rally amid improving commodity prices, perceived stability in China's macro data, and expectations for gradualist Fed policy.
Source: Putnam. Data as of June 30, 2018. To create the Global Risk Appetite Index, we weigh the monthly excess returns of 30 different asset classes over 3-month T-bills relative to the trailing 2-year volatility of each asset class. The higher the excess return and the lower the volatility, the greater the risk appetite; conversely, the lower the excess return and the higher the volatility, the stronger the risk aversion.