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Risk Aversion Index

Nov 05 2022

Risk Aversion Index: A New “Lower-Risk” Signal

  • Nov 5, 2022

Given depressed market sentiment and favorable seasonality, near-term prospects look better for risky assets.

Sep 08 2022

Risk Aversion Index: Stayed On “Higher-Risk” Signal

  • Sep 8, 2022

The risk of a policy error is the top concern as the Fed doubles the pace of Quantitative Tightening, even with the U.S. technically in a recession. Caution is recommended.

Aug 05 2022

Risk Aversion Index: Stayed On “Higher-Risk” Signal

  • Aug 5, 2022

The risk of a policy error is extremely high as the Fed stays on an aggressive tightening path even with the U.S. in a “technical” recession. Caution is recommended.

Jul 08 2022

Risk Aversion Index: Stayed On “Higher-Risk” Signal

  • Jul 8, 2022

The risk of a policy error is elevated as the Fed stays on an aggressive tightening path even though growth materially slows. Caution is recommended.

Jun 07 2022

Risk Aversion Index: Stayed On “Higher-Risk” Signal

  • Jun 7, 2022

While inflation might have peaked, a material slowdown looks more certain as the Fed stays on an aggressive tightening path. Caution is warranted.

May 06 2022

Risk Aversion Index: A New “Higher-Risk” Signal

  • May 6, 2022

As long as the Fed stays on the current aggressive tightening path, caution is highly recommended.

Apr 06 2022

Risk Aversion Index: Stayed On “Lower-Risk” Signal

  • Apr 6, 2022

With the Fed still on a tightening path, caution is still recommended. Among fixed income, we remain neutral on TIPS but have turned favorable toward EM bonds.

Mar 05 2022

Risk Aversion Index: A New “Lower-Risk” Signal

  • Mar 5, 2022

Despite continued weakness in equities and a higher reading in our Risk Aversion Index (RAI), it generated a “Lower-Risk” signal.

Feb 05 2022

Risk Aversion Index: Stayed On “Higher Risk” Signal

  • Feb 5, 2022

Lofty valuations amid shrinking liquidity conditions make all risky assets vulnerable.

Jan 07 2022

Risk Aversion Index: Stayed On “Higher Risk” Signal

  • Jan 7, 2022

The impact of Omicron is already fading and the global-tightening cycle is far more important going forward. Elevated valuations amid a broadening global-tightening cycle is our key concern.

 

Dec 07 2021

Risk Aversion Index: New “Higher Risk” Signal

  • Dec 7, 2021

With the market getting less sensitive to each iteration of new variant, we believe the impact of Omicron is unlikely to be as significant as the global-tightening cycle.

Nov 05 2021

Risk Aversion Index: New “Lower Risk” Signal

  • Nov 5, 2021

With seasonality once again turning positive and inflation breakeven rates bumping above the recent range, we continue to favor the reflation trade.

Oct 07 2021

Risk Aversion Index: Stayed On “Higher Risk” Signal

  • Oct 7, 2021

Elevated valuations and a global tightening cycle are usually not a favorable context for risky assets. Within fixed income, we remain positive toward TIPS and cautious on credit.

Sep 08 2021

Risk Aversion Index: Stayed On “Higher Risk” Signal

  • Sep 8, 2021

The reflation trade stayed in a holding pattern with breakeven rates remaining range bound. Within fixed income, we are favorable toward TIPS and cautious on credit.

Aug 06 2021

Risk Aversion Index: A New “Higher Risk” Signal

  • Aug 6, 2021

Our Risk Aversion Index moved higher and generated a new “Higher Risk” signal. Within fixed income, we are favorable toward TIPS and cautious on credit.

Jul 08 2021

Risk Aversion Index: Stayed On “Lower Risk” Signal

  • Jul 8, 2021

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.

Jun 05 2021

Risk Aversion Index: Stayed On A “Lower Risk” Signal

  • Jun 5, 2021

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.

May 07 2021

Risk Aversion Index: A New “Lower Risk” Signal

  • May 7, 2021

The reflation trade continued with higher breakeven rates and lower real yields, a favorable make-up for risky assets.

Apr 08 2021

Risk Aversion Index: Stayed On “Higher Risk” Signal

  • Apr 8, 2021

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.

Mar 05 2021

Risk Aversion Index: A New “Higher Risk” Signal

  • Mar 5, 2021

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.

Feb 05 2021

Risk Aversion Index: Stayed On “Lower Risk” Signal

  • Feb 5, 2021

We remain favorable toward credit including investment grade and high yield corporates.

Jan 08 2021

Risk Aversion Index: Stayed On “Lower Risk” Signal

  • Jan 8, 2021

We remain favorable toward credit and recommend both investment grade and high yield corporates.

Dec 05 2020

Risk Aversion Index: A New “Lower Risk” Signal

  • Dec 5, 2020

With election risk largely in the rear-view mirror, volatility has come down across most asset classes, contributing to the drop in the RAI.

Nov 06 2020

Risk Aversion Index: Stayed On “Higher Risk” Signal

  • Nov 6, 2020

We are cautious near term and recommend playing defense through duration reduction within corporate credit (including both investment grade and high yield).

Oct 07 2020

Risk Aversion Index: New “Higher Risk” Signal

  • Oct 7, 2020

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).

Sep 05 2020

Risk Aversion Index: Stayed On “Lower Risk” Signal

  • Sep 5, 2020

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.

Aug 07 2020

Risk Aversion Index: Stayed On “Lower Risk” Signal

  • Aug 7, 2020

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.

Jul 08 2020

Risk Aversion Index: Stayed On “Lower Risk” Signal

  • Jul 8, 2020

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.

Jun 05 2020

Risk Aversion Index: New “Lower Risk” Signal

  • Jun 5, 2020

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.

May 07 2020

Risk Aversion Index: Stayed On “Higher Risk” Signal

  • May 7, 2020

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.

Apr 07 2020

A Cross-Asset Dash For Cash

  • Apr 7, 2020

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.

Mar 06 2020

Risk Aversion Index: Stayed On “Higher Risk” Signal

  • Mar 6, 2020

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.

Feb 06 2020

Risk Aversion Index: New “Higher Risk” Signal

  • Feb 6, 2020

We are turning more cautious toward lower-grade credit and will likely remain so until we see the peak in new coronavirus cases.

Jan 07 2020

Risk Aversion Index: Stayed On “Lower Risk” Signal

  • Jan 7, 2020

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.

Nov 07 2019

Risk Aversion Index: New “Lower Risk” Signal

  • Nov 7, 2019

We are turning favorable again toward credit, especially emerging market sovereign debt.

Oct 04 2019

Risk Aversion Index: Fell But Stayed On “Higher Risk” Signal

  • Oct 4, 2019

Recent data has certainly increased the risk of an imminent recession, but more confirmation is needed to move us into the recession camp.

Sep 07 2019

Risk Aversion Index: Stayed On “Higher Risk” Signal

  • Sep 7, 2019

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.

Aug 06 2019

Risk Aversion Index: Stayed On “Higher Risk” Signal

  • Aug 6, 2019

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.

Jul 04 2019

Risk Aversion Index: Stayed On “Higher Risk” Signal

  • Jul 4, 2019

Our Risk Aversion Index fell in June but stayed on the “Higher Risk” signal generated in May.

May 07 2019

Risk Aversion Index: Maintains “Lower Risk” Signal

  • May 7, 2019

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.