PUTNAM GLOBAL RISK APPETITE INDEX | May 2021

The Putnam Global Risk Appetite (RA) Index is a proprietary quantitative model that aims to measure investors’ willingness to invest in risky assets, including equities, commodities, high-yield bonds, and other spread sectors. With a composite view of risk-appetite signals across a broad mix of asset types, Putnam’s RA Index provides a framework for discussing investor preferences and can signal trend changes in broad market sentiment.


Risk appetite improves

SHORT-TERM TREND

April was a typical risk-on month, as U.S. rates drifted lower

Risk

  • High-yield and emerging-market corporate credit underperformed.
  • The U.S. dollar weakened, and European and emerging-market currencies gained.
  • Oil prices fell as precious metals and agricultural commodities advanced.
  • Technology and growth stocks benefited the most from the rates rally.
  • Small-cap and emerging-market equities underperformed.

LONG-TERM CYCLE

This 10-year illustration captures the cyclicality of investors' appetite for risk.

risk key

Sept–Nov '11

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–present

The coronavirus pandemic has created large swings in global risk appetite.

Source: Putnam. Data as April 30, 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.