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Risk Aversion Index

Aug 06 2018

Risk Aversion Index: A New “Lower Risk” Signal

  • Aug 6, 2018

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.

Aug 04 2016

Risk Aversion Index—New “Lower Risk” Signal

  • Aug 4, 2016

We expect the search for yield to continue in the near term and favor Higher Quality credits within fixed income.

Jun 07 2016

Risk Aversion Index—Ticked Up But Stayed On “Lower Risk” Signal

  • Jun 7, 2016

The real test for risky assets lies immediately ahead with central bank meetings, the Brexit vote, and the Spanish election later in the month. We continue to favor Higher Quality credits within fixed income.

Mar 07 2016

Risk Aversion Index—Ticked Lower But Stayed On “Higher Risk” Signal

  • Mar 7, 2016

We believe a short term rally is more likely and recommend a neutral stance towards credits at this point.

May 07 2015

Risk Aversion Index Fell Sharply, Generated A New “Lower Risk” Signal

  • May 7, 2015

Favor credits within fixed income in the near term but beware of volatility ahead

Apr 08 2015

RAI Ticked Up And Stayed On “Higher Risk” Signal

  • Apr 8, 2015

We recommend staying cautious and exercising patience in the near term.

Mar 06 2015

Risk Aversion Index—Fell Sharply But Stayed On “Higher Risk” Signal

  • Mar 6, 2015

We are leaning towards a more favorable outcome for risky assets but staying alert.

Feb 06 2015

Risk Aversion Index—Stays On “Higher Risk” Signal

  • Feb 6, 2015

The market is at a critical juncture with oil-related assets very oversold while equities are holding near all-time highs.

Dec 05 2014

Risk Aversion Index Stays On “Lower Risk” Signal

  • Dec 5, 2014

Continued strength in equities offsets the weakness in credits and commodities to arrive at an essentially flat reading.

Aug 06 2014

Risk Aversion Index Ticked Up - Still On “Higher Risk” Signal

  • Aug 6, 2014

There have been several cases in the last couple years where credit and/or currency risk-off events never affected equities. We will soon find out if this is just another one of those. Caution is recommended.

Jun 05 2014

Risk Aversion Index - New Higher Risk Signal

  • Jun 5, 2014

Surprising strength in the Yen, a drop in commodities, and slightly wider credit spreads pushed up the index. An increase in risk aversion becomes more likely at the current extremely low level. Caution is warranted.

Apr 07 2014

RAI Lower - Stays on "Lower Risk" Signal

  • Apr 7, 2014

Risk assets continued to perform well in March, and our monthly Risk Aversion Index (RAI) fell to near record low levels. We continue to favor high quality credits within fixed income.

Mar 06 2014

RAI Falls Sharply—New “Lower Risk” Signal

  • Mar 6, 2014

This closed out the one month old “Higher Risk” signal. We continue to favor high quality credits within fixed income.

Feb 07 2014

Risk Aversion Index Turns Higher, New “Higher Risk” Signal

  • Feb 7, 2014

We are turning defensive within fixed income and recommend moving up the quality scale.

Jan 08 2014
Dec 06 2013

Risk Aversion Index Edges Lower, Stays On Its “Lower Risk” Signal

  • Dec 6, 2013

We are in the seasonally favorable part of the year and we continue favoring high-grade credits within fixed income.

Nov 07 2013

Risk Aversion Index Falls Further, Stays On Its “Lower Risk” Signal

  • Nov 7, 2013

We seem to be in a “Goldilocks” period, where economic numbers are not bad enough to re-ignite recession fears but are just weak enough to push the taper farther off.

Sep 10 2013

RAI Falls, But Stays On “Higher Risk” Signal—Remain Cautious

  • Sep 10, 2013

The RAI fell in August and stayed on a “High Risk” signal. We remain cautious and recommend higher quality within fixed income.

Aug 07 2013

RAI Fell, But Stayed On “Higher Risk” Signal—Remain Cautious

  • Aug 7, 2013

The RAI fell in July and stayed on a “High Risk” signal. We remain cautious and recommend higher quality within fixed income.

Jan 07 2013

New “Higher Risk” Signal — But We Remain Cautiously Optimistic

  • Jan 7, 2013

We’re downplaying the new signal’s significance and remain cautiously optimistic towards risky assets near term. Our biggest concern is that a rise is extremely likely going forward. 

Dec 06 2012

The State Of Interest Rates

  • Dec 6, 2012

We think interest rates will stay low for an extended period of time, so the key question is, when will rates start rising?


Jun 06 2012

New Higher Risk Signal Generated But Optimistically Cautious

  • Jun 6, 2012

This new “Higher Risk” signal closed out the previous “Lower Risk” signal generated last December, and this measure is telling us it’s time to play a little defense.


Feb 05 2012

Interest Rate Expectations

  • Feb 5, 2012

In the near term, U.S. interest rates are expected to be range-bound, and we remain neutral on the U.S. yield curve. Bond Market Risk Aversion Index fell again in January, and remains on a “lower risk” signal.

Jan 05 2012

New “Lower Risk” Signal Generated

  • Jan 5, 2012

Bond Market Risk Aversion Index fell in December, resulting in a new “lower risk” signal that closed out the “higher risk” signal which occurred back in May. We are now cautiously optimistic.


Dec 06 2011

Risk Aversion Edged Up - Stay Defensive And Be Patient

  • Dec 6, 2011

The Risk Aversion Index edged up during November. It is still on a “higher risk” signal. We will stay defensive and be patient. Higher quality assets within the fixed income space are favored.


Nov 05 2011

Risk Aversion Fell Sharply, But Caution Still Warranted

  • Nov 5, 2011

The Risk Aversion Index fell sharply during October. Despite the sharp drop in the index, it has not fallen enough to generate a new “lower risk” signal. Our take on the current reading  is “wait and see” with a bias towards lower risk.


Oct 05 2011

Risk Contagion Underway, But There Is A Silver Lining

  • Oct 5, 2011

A Risk Contagion is now underway, and we continue to stay defensive and favor higher quality assets within the fixed income space. A silver lining: When the Risk Aversion Index moves above 1, odds start to favor a decrease in risk aversion going forward. The bulk of the move is probably done.


Sep 04 2011

It Is All About Confidence

  • Sep 4, 2011

As we expected, the U.S. downgrade was digested by the market fairly quickly and attention turned to the economy. This is a bear market in confidence, more than anything else.


Aug 04 2011

It’s The Economy, Stupid

  • Aug 4, 2011

U.S. likely averted worst-case scenario of default, but credit rating downgrade is still likely. Main impact of downgrade is not the increase in interest rates itself, but rather the liquidity risk in all markets that involve treasury securities as collateral.


Jul 05 2011

Risk Aversion Index Says “Wait And See”

  • Jul 5, 2011

The Monthly Risk Aversion Index edged down slightly in June, pausing for a clearer direction. The biggest contributors of risk are commodities and credit spreads.

Jun 05 2011

Now Entering Increasing Risk Aversion Environment

  • Jun 5, 2011

Risk Aversion Index accelerated in May, making it prudent to favor defensive assets near term. Expect small and gradual increase in long term interest rates.


May 04 2011

The Bond Bubble Is Beginning To Deflate… Is This Cheap Money Era Ending?

  • May 4, 2011

An orderly decline of the dollar is not necessarily a big concern. On the other hand, a sudden collapse of the dollar, in conjunction with spiking U.S. interest rates, would be a terrible thing. So far this has not been the case.


Apr 05 2011

Monthly Risk Aversion Index (RAI)

  • Apr 5, 2011

This month’s “Inside The Bond Market” presents our new “Risk Aversion Index,” which was developed by Chun Wang to respond to those factors that the bond market is truly worrying about. The Index examines ten factors on a monthly basis to help best position a bond portfolio.