PUTNAM GLOBAL RISK APPETITE INDEX | May 2023

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.


Non-U.S. markets offset U.S. recession worries

SHORT-TERM TREND

April featured a combination of slightly higher real rates, a small rise in risk assets, and a slightly lower U.S. dollar. Worries about the banking sector and a potential recession came and went, but did not intensify. Non-U.S. assets benefited from the fact that recession concerns and disinflation hopes remained confined to the U.S. While the Risk Appetite was directionless overall, by the end of April, it was in positive territory.

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LONG-TERM CYCLE

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

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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 '21

Easy monetary policies and reopenings supported risk assets.

Jan '22–present

Central bank tightening, inflation, and Russia-Ukraine War increase volatility and uncertainty.

Source: Putnam. Data as of April 30, 2023. 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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