Risk appetite tilts downward
SHORT-TERM TREND
August was a typical "risk-off" month
Risk

- Global equities declined across the board.
- The majority of fixed-income assets rallied, led by U.S. Treasuries.
- The U.S. dollar rose against other global currencies.
- Emerging-market equities and fixed-income assets underperformed.
- Gold prices increased, while other commodities posted poor returns.
LONG-TERM CYCLE
This 10-year illustration captures the cyclicality of investors' appetite for risk.
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 sell-off 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, 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.