Goal Kickstart Risk Appetite Reversal

The report analyzes a recent sharp reversal in risk appetite that peaked in early June, primarily driven by equity and volatility components. It outlines a strategy of tactical neutrality while maintaining a pro-risk outlook for the 12-month horizon.

Key Takeaways

• 1.After peaking on June 2nd, the Risk Appetite Indicator (RAI) experienced a sharp 2-week decline driven primarily by equity and equity volatility, though it has started to rebound following US/Iran interim peace agreement news.
• 2.Investment stance is tactically neutral but remains modestly pro-risk for 12 months, favoring an overweight position in equities and underweight in credit.

Table of Contents

• Risk Appetite Reversal - dissecting cross-asset moves in the June roundtrip
• Cross-asset: Forecasts
• Cross-asset: Weekly and YTD performance, absolute and risk-adjusted
• Cross-asset: Risk appetite indicator
• Cross-asset: Risk Appetite principal component analysis
• Cross-asset: Balanced portfolios and dynamic allocation strategies performance
• Cross-asset: Equity vs. credit monitor
• Cross-asset: Valuation and risk premia
• Cross-asset: Yields
• Cross-asset: Sentiment and Positioning
• Cross-asset: Global Funds Flows
• Cross-asset: CFTC positioning
• Cross-asset: Correlations: Equity vol/CDS, commodity prices/credit & FX, equity/bond, equity/FX
• Cross-asset: Correlation matrix
• Cross-asset: Implied and realised vol, call and put skew
• Cross-asset: Volatility, skew, CDS with equity vol, rate vol
• Cross-asset: Liquidity indicators
• Cross-asset: Market pricing of US recession risk
• Equity: Drawdown probability
• Equity: Valuation and styles
• Equity: Earnings
• Government bonds: Yield curves
• Government bonds: Real yields, inflation, breakevens, 10y IR differentials
• Commodities: Curve shapes and roll yields
• FX: Forecasts and forwards, recent performance and positioning

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