Risk appetite recovers
Investors continue to mull the Federal Reserve's update on interest rates amid high inflation
- U.S. Treasury securities, including inflation-linked bonds, gained.
- There was a broad-based rally in global equity indices with Japanese stocks being the laggards.
- The S&P 500 and Nasdaq Composite extended their gains, but emerging market stocks underperformed.
- Fixed income spread sectors underperformed, and excess returns were either small or negative.
- Commodities, including oil, advanced.
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 October 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.