Safe Assets, Low Risks

by Michael J. Howell31. December 2013 12:42
At CrossBorder Capital we measure risk appetite by the 'normalised' actual portfolio exposure of investors to equities less bonds. Based on an index that can range +/- 100, the current reading is around +20 for Developed stock markets. Significant corrections tend to occur at +60, or noticeably different from current readings. These readings reflect the balance between risky and 'safe' assets. In other words risk appetite is currently above average, but not by too much. What are safe assets? Simply, cash and government bonds or looked at another way the sum of Central Bank QE policies and the swollen Government deficits. Any chance of these reversing? Not much. Therefore, the safe asset mix is only just below average and the supply of safe assets looks set to continue expanding. Not too bad for risk asset prices? See Report 'Risk Appetite Indexes'

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