Risk appetite weakens slightly
June was a volatile month for risk sentiment
- A rally in real rates helped stabilize risky asset markets.
- U.S. equities and Treasury bonds advanced.
- Emerging-market equities outperformed international developed markets.
- Non-U.S. currencies were notable outperformers compared with the dollar.
- Energy commodities , including oil, gained.
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 June 30, 2020. To create the Global Risk Appetite Index, we weigh the monthly relative 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 relative return and the lower the volatility, the greater the risk appetite; conversely, the lower the relative return and the higher the volatility, the stronger the risk aversion.