Risk Aversion Index
Risk Aversion Index: New “Lower Risk” Signal
Our Risk Aversion Index fell sharply in May and generated a new “Lower Risk” signal. Within fixed income, we are turning more constructive on credit, overall, and maintain our favorable view toward investment-grade corporate bonds.
Risk Aversion Index: Stayed On “Higher Risk” Signal
While macro data has turned from “bad” to “less bad,” a lot of hope for a quick recovery in economic activity has been priced in. We recommend staying within range of the Fed’s fire power for the time being.
A Cross-Asset Dash For Cash
March’s mad dash for cash didn’t stop with rates/credit/FX markets. Among equities, there was also a strong preference for cash liquidity. The market rewarded companies that had strong cash positions and punished those without—which explains why traditionally defensive styles actually underperformed.
Risk Aversion Index: Stayed On “Higher Risk” Signal
We will remain cautious toward lower-grade credit until we see the peak in new coronavirus cases. It all comes down to the recession call and the coronavirus has significantly increased recession risk.
Risk Aversion Index: New “Higher Risk” Signal
We are turning more cautious toward lower-grade credit and will likely remain so until we see the peak in new coronavirus cases.
Risk Aversion Index: Stayed On “Lower Risk” Signal
While the overall near-term tone is still positive for risky assets, complacency seems widespread too. This tempers our enthusiasm to chase risky assets at this point.
Risk Aversion Index: New “Lower Risk” Signal
We are turning favorable again toward credit, especially emerging market sovereign debt.
Risk Aversion Index: Fell But Stayed On “Higher Risk” Signal
Recent data has certainly increased the risk of an imminent recession, but more confirmation is needed to move us into the recession camp.
Risk Aversion Index: Stayed On “Higher Risk” Signal
More and more signs are pointing to investors’ loss of confidence in central banks’ ability to revive the global economy. We maintain “neutral” on all credit classes.
Risk Aversion Index: Stayed On “Higher Risk” Signal
A hawkish Fed cut, immediately followed by Trump’s new tariffs, caused quite a bit of market indigestion, a clear reminder of how quickly things can change.
Risk Aversion Index: Stayed On “Higher Risk” Signal
Our Risk Aversion Index fell in June but stayed on the “Higher Risk” signal generated in May.
Risk Aversion Index: Maintains “Lower Risk” Signal
Our Risk Aversion Index ticked lower in April and stayed on the “Lower Risk” signal. Most risky assets participated and the rally was broad-based. The only fly in the ointment is EM assets. The recent weakness in both Chinese stocks and the Yuan is certainly worth paying attention to.
Risk Aversion Index: Stayed On “Lower Risk” Signal
With most major central banks now turning dovish, our view on credit is more constructive. We still view pull-backs in EM assets as better entry points. Investment grade corporate bonds are also attractive, and we maintain a neutral view on Munis and High Yield bonds.
Risk Aversion Index: Stayed On “Lower Risk” Signal
While global central banks’ dovish turn provides a supportive backdrop for the risk rally, short-term overbought conditions are everywhere too.
Risk Aversion Index: New “Lower Risk” Signal
With the Fed now pausing its rate hikes, and the PBoC recapitalizing banks and reactivating lending, our view on credit has turned from defensive to neutral, with a more constructive bias. One of our biggest concerns, global central bank liquidity withdrawal, has been eased by the recent policy moves.
Risk Aversion Index: New “Higher Risk” Signal
Despite some near-term oversold conditions in risky assets, we continue to recommend defense and expect higher volatility to remain across all asset classes.
Risk Aversion Index: New “Lower Risk” Signal
Despite the recent signal whipsaws, we have been cautious toward all risky assets and we continue to recommend defense amid higher volatility across all asset classes.
Risk Aversion Index: New “Higher Risk” Signal
We have been leaning toward the defensive side despite the recent signal whipsaws and we continue to recommend caution in light of the increase in volatility across all asset classes.
Risk Aversion Index: New “Lower Risk” Signal
Our Risk Aversion Index fell sharply last month and triggered a new “Lower Risk” signal. Caution is still strongly recommended, and we favor higher-quality credit within fixed income.
Risk Aversion Index: New “Higher Risk” Signal
Our Risk Aversion Index reversed higher last month and triggered a new “Higher Risk” signal. We recommend a defensive stance within fixed income.
Risk Aversion Index: A New “Lower Risk” Signal
Our Risk Aversion Index fell enough last month to generate a new “Lower Risk” signal. This is certainly not a “no brainer” risk-on signal. We recommend higher quality spread products within fixed income.
Risk Aversion Index: Stayed On “Higher Risk” Signal
We believe the negative impact of central bank liquidity reduction is here to stay for the foreseeable future. We recommend defense within fixed income.
Risk Aversion Index: Stayed On “Higher Risk” Signal
Volatility among non-equity asset classes has gone up noticeably while the VIX dipped lower. We still expect volatility to stay high and continue to play defense within fixed income.
Risk Aversion Index: Stayed On “Higher Risk” Signal
We expect volatility to stay high and still recommend defensive positions within fixed income.
Risk Aversion Index: Stayed On “Higher Risk” Signal
While concerns about a trade war might be easing and the credit market has been largely unaffected by the surge in Libor rates, we have to recognize the fact that Trump’s policy focus has become increasingly market-unfriendly while global central banks are in a liquidity-reducing mode.
Risk Aversion Index: A New “Higher Risk” Signal
While the late rebound in risky assets pared back earlier losses, weakness was observed in all major risk asset classes. We continue to recommend defense for the time being.
Risk Aversion Index: Turned Higher But Stayed On The “Lower Risk” Signal
Our Risk Aversion Index turned higher last month but stayed on the “Lower Risk” signal as of the end of January. The first few days of February brought a big surge in this index and would suggest a “Higher Risk” stance for the near term.
Risk Aversion Index: New “Lower Risk” Signal
Our Risk Aversion Index turned lower in December and reached an all-time low. We remain favorable toward higher quality credit within fixed income.
A New “Higher Risk” Signal
The index ticked up on the back of higher VIX, a High Yield credit mini sell-off, and EM underperformance. We are turning a bit more cautious toward credit but still recommend safe spreads within fixed income.
RAI Stayed On “Lower Risk” Signal
The range-bound interest rate action provides a friendly environment to earn the carry, through moderate duration and high grade credit exposure.
Risk Aversion Index: Stayed On The “Lower Risk” Signal
We believe the “Goldilocks” environment is still intact. Earn the carry.
Risk Aversion Index: Stayed On The “Lower Risk” Signal
With the “Goldilocks” scenario still intact, we believe earning the carry is the right approach and high grade credit fits the bill.
Risk Aversion Index: Stayed On The “Lower Risk” Signal
With neither inflation nor recession an imminent threat, the “Goldilocks” scenario remains intact. We continue to view high grade credit favorably within the fixed income space.
Risk Aversion Index: New “Lower Risk” Signal
“Lower Risk” signal closed out the “Higher Risk” signal generated five months ago. We’re encouraged by the resilience in risky assets during the oil sell-off and the late surge in global bond yields. We’ve been favorable toward high-grade credit and maintain this view within the fixed income space.
Risk Aversion Index: Still On “Higher Risk” Signal
The global risk rally is broad-based enough to justify a favorable credit view and we still believe higher quality credit offers better reward/risk.
Risk Aversion Index: Still On “Higher Risk” Signal
Last month, we recommended going up in quality within fixed income and we maintain this cautious stance for the time being.
Risk Aversion Index: Still On “Higher Risk” Signal
We recommend going up in quality across the whole fixed income spectrum.
Risk Aversion Index: Stayed On The “Higher Risk” Signal
While we continue to view spread products favorably within fixed income, the March rate hike has yet to have its impact play out. In the near term, we will respect the “higher risk” signal and exercise caution.
Risk Aversion Index: A New “Higher Risk” Signal
This new signal is mostly due to a much lower reading three months ago.
Risk Aversion Index– Stayed On “Lower Risk” Signal
Given the not-too-hot-not-too-cold macro backdrop, we expect the credit rally to continue in the near term and favor spread products within fixed income.