Risk appetite remains positive
Sentiment picked up as growth worries eased and Covid-19 cases stabilized in the United States
- U.S. Treasury yields were choppy but rose, and asset classes with higher beta to Treasuries returned negative.
- All three major U.S. equity indexes advanced as sectors that benefited from the pandemic outperformed.
- European and emerging market equities gained as Chinese markets stabilized.
- The U.S. dollar gained against the major currencies but lost ground against growth sensitive currencies.
- Gold was flat on weaker U.S. activity, high inflation and the Fed's taper plans.
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 August 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.