Risk appetite turns lower
September was a risk-off month on higher rates, slow growth expectations
- Among fixed-income assets, U.S. Treasury securities underperformed the most.
- Stocks in Japan gained as U.S. — including the technology-heavy Nasdaq Composite — and global equity indexes declined.
- Non-U.S. assets were affected by a strong dollar and higher exposure to China, and parts of Europe.
- Energy commodities were the star performers due to the energy crisis.
- Precious metals dropped, while industrial metals were mixed.
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 swings in global risk appetite.
Source: Putnam. Data as September 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.