Risk Appetite Reversal: Dissecting Cross-Asset Moves In The June Roundtrip

This report analyzes the mid-June reversal in global risk appetite, noting that the sharp decline in indices was driven by equity and volatility components. Despite this, the firm maintains a pro-risk 12-month outlook supported by strong earnings and normalization of inflation.

Key Takeaways

• 1.The Risk Appetite Indicator (RAI) dropped sharply in early June after peaking on June 2nd, driven primarily by equity and equity volatility sub-components.
• 2.Goldman Sachs remains tactically neutral on asset allocation but holds a modestly pro-risk 12-month outlook (OW equities, UW credit).
• 3.Market sentiment has been bolstered by a US/Iran interim peace agreement, aiding a recovery in assets like EM equities and Gold.

Table of Contents

• GOAL KICKSTART
• 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, breakeven, 10y IR differentials
• Commodities: Curve shapes and roll yields
• FX: Forecasts and forwards, recent performance and positioning

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