Risk appetite rebounds
The risk rally in November was led by medium-term growth prospects and vaccines news.
- Equity sectors that likely will benefit relatively more from mass vaccinations outperformed.
- Non-U.S.-developed-market equities outperformed the technology-heavy, U.S. equity indices.
- Emerging-market assets underperformed, but China and North Asian countries led the equity gains.
- Fixed-income assets underperformed, dragged lower by U.S. Treasuries.
- The U.S. dollar depreciated 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.
March '20–presentThe coronavirus pandemic has created large swings in global risk appetite.
Source: Putnam. Data as November 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.