Risk appetite plunges in March
It was the second worst month since 1980 as virus hits risk tolerance
- U.S. and international equity markets tumbled.
- U.S. Treasuries had positive returns despite dislocations in the market.
- International rate markets' lagged Treasuries.
- The dollar surged as investors piled into safe haven assets.
- Gold prices fell slightly even as liquidity dried up.
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 March 31, 2020. 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.