Risk appetite remains steady
August was a flat month in terms of appetite for riskier assets.
- U.S. equities outperformed, while fixed-income securities had positive returns
- Emerging-market assets weakened amid higher rates and strong dollar.
- Commodities, excluding energy, declined but oil prices rose.
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 August 31, 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.