Risk Aversion Index
Risk Aversion Index: Stayed On “Lower Risk” Signal
With the looming Fed taper and valuations stretched on almost all risky assets, volatility is likely to increase in the near term. Among fixed income, we are favorable toward TIPS and cautious on credit.
Risk Aversion Index: Stayed On A “Lower Risk” Signal
The talk of taper has started to resurface. In this context, higher inflation might become a negative for credit. For now, we remain favorable toward TIPS but turn cautious toward credit.
Risk Aversion Index: A New “Lower Risk” Signal
The reflation trade continued with higher breakeven rates and lower real yields, a favorable make-up for risky assets.
Risk Aversion Index: Stayed On “Higher Risk” Signal
The reflation theme continues to be supported by the powerful policy mix and a successful vaccine rollout. Within fixed income, we are favorable toward TIPS and short-term high-yield credit.
Risk Aversion Index: A New “Higher Risk” Signal
While mechanical signals generated from extremely low RAI levels can be noisy, extended valuations on most assets suggest we err on the side of caution.
Risk Aversion Index: Stayed On “Lower Risk” Signal
We remain favorable toward credit including investment grade and high yield corporates.
Risk Aversion Index: Stayed On “Lower Risk” Signal
We remain favorable toward credit and recommend both investment grade and high yield corporates.
Risk Aversion Index: A New “Lower Risk” Signal
With election risk largely in the rear-view mirror, volatility has come down across most asset classes, contributing to the drop in the RAI.
Risk Aversion Index: Stayed On “Higher Risk” Signal
We are cautious near term and recommend playing defense through duration reduction within corporate credit (including both investment grade and high yield).
Risk Aversion Index: New “Higher Risk” Signal
Treasuries’ ability to provide downside protection has weakened; a better way to play defense is probably through duration reduction within corporate credit (including both investment grade and high yield).
Risk Aversion Index: Stayed On “Lower Risk” Signal
The breakeven rates capture the spirit of the overall risk rally and continue to provide support. The change in the Fed’s policy goals means it will remain accommodative for even longer.
Risk Aversion Index: Stayed On “Lower Risk” Signal
With “reopening” taking a pause, we expect global policies to remain accommodative even longer. Among fixed income, we like corporate credit, which includes both investment grade and high yield bonds.
Risk Aversion Index: Stayed On “Lower Risk” Signal
While the market seems to have priced in a quick recovery, recent economic data has materially exceeded market expectations and provided support to the rally. Within fixed income, we maintain a favorable view toward investment-grade corporate bonds and we still recommend staying within range of the Fed’s fire power.
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.