Putnam Investments | The Macro Reportmarket
PUTNAM GLOBAL RISK APPETITE INDEX | June 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 stays positive

SHORT-TERM TREND

Investor sentiment was supported by global reopenings amid inflation worries

Risk

  • U.S. technology and long-duration growth stocks underperformed the broader market.
  • European and developed market equity indexes gained, but emerging markets lagged.
  • U.S. Treasury yields were broadly stable.
  • Fixed-income assets benefited from the rally in real rates, but inflation-linked securities outperformed.
  • The U.S. dollar depreciated against major currencies.
  • Commodities, including gold, energy, and agricultural goods, advanced.
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 May 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.