Risk appetite recovers in October
"Risk-on" sentiment rebounds on hopes of reduced trade policy risk.
- Global equity indices rallied, outperforming stocks in the United States.
- U.S. Treasuries and the dollar declined.
- Emerging-market bonds gained, outperforming other major fixed-income assets.
- Gold prices held up well even amid negative yields on government bonds.
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 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 October 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.