Risk appetite bounces
Financial markets advance amid optimism over a COVID-19 vaccine
- U.S. Treasuries sold off as risk assets, especially equities, advanced.
- The rally in investment-grade credits and other assets halted as Treasury bonds declined.
- Technology-driven indices resumed their outperformance.
- The rally in gold prices ebbed.
- The dollar lost ground against major currencies.
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 August 31, 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.