PUTNAM GLOBAL RISK APPETITE INDEX | November 2018

The Putnam Global Risk Appetite (RA) Index is a proprietary quantitative model that aims to measure investors’ willingness to invest in risky assets, including equities, commodities, high-yield bonds, and other spread sectors. With a composite view of risk-appetite signals across a broad mix of asset types, Putnam’s RA Index provides a framework for discussing investor preferences and can signal trend changes in broad market sentiment.

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Risk appetite tumbles

SHORT-TERM TREND

October was one of the worst months since 1980

Risk

  • Small-cap stocks were the worst performers.
  • U.S. Treasuries failed to generate excess returns.
  • Non-U.S. risk-free rate markets did marginally better.
  • Emerging-market corporate credit gained, but emerging-market equities tumbled.

LONG-TERM CYCLE

This 10-year illustration captures the cyclicality of investors’ appetite for risk.

Sept ’08

With Lehman Brothers’ bankruptcy and the onset of the global financial crisis, appetite for risk all but disappears.

Sept–Nov ’11

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 October 31, 2018. We base our Global GDP Nowcast on a tailored methodology that captures daily data releases for the lost essential growth characteristics for each of 25 countries — including purchasing managers’ index data, industrial production, retail sales data, labor market metrics, real estate price indexes, sentiment indicators, and numerous other factors. The mix of factors used for each market may change over time as new indicators become available from data sources or if certain factors become more, or less, predictive of economic growth.