Risk appetite flattens
Investor sentiment remained fragile as market volatility rose.
- Many equity indexes advanced, with emerging markets under-performing.
- U.S. Treasury bonds, especially long-term notes, led the sell-off in most fixed-income assets.
- European sovereign bonds with their currency components hedged rose.
- Oil prices declined amid worries about demand.
- The U.S. dollar strengthened against most global 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 March 31, 2021. 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.