Risk appetite edges up slightly
March was another risk-on month
- Many fixed-income assets generated positive returns amid low volatility
- U.S. small-cap stocks underperformed other equities
- The dollar rose, contributing to the underperformance of emerging-market assets
- U.S. real rates rallied the most as investors worried about growth in Europe
This 10-year illustration captures the cyclicality of investors' appetite for risk.
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 March 31, 2019. 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.