Interest rates cause sell-off
Another rates-driven sell-off
- Risk assets sold off in August, with higher rates as the main culprit
- Chair Powell's Jackson Hole speech clarified rate expectations
- In Europe and the U.K., central banks have been steepening the yield curve
- EM assets outperformed, with China contributing
This 10-year illustration captures the cyclicality of investors' appetite for risk.
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–Dec '21Easy monetary policies and reopenings supported risk assets.
Jan '22–presentCentral bank tightening expectations along with the Russia-Ukraine crisis raise market volatility.
Source: Putnam. Data as of August 31, 2022. 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.
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