For now, if a correlation with stocks does exist, some analysts have suggested that cryptocurrencies such as bitcoin could be an indicator of
appetite for risky assets such as equities.
And it's the uncertainty of the price you'll get
for your risky assets like shares when you need to sell them that is behind the shift into bonds and cash.
According to the capital market theory, return requirements by
investors for all risky assets are influenced by the risk - free rate, that is, the interest rate.
Considering these dynamics, we find duration (a measure of interest - rate risk) to be somewhat more concerning today than in recent memory and the
prospects for risky assets will vary depending on how future duration moves are divided between breakevens and real rates.
Investors should just relax, according to Goldman Sachs Group Inc..
Appetite for riskier assets such as stocks and high - yield bonds has been suppressed...
Stocks Gain on Increased Demand
for Risky Assets U.S. equity markets erased earlier losses triggered by the weaker than expected U.S. Non-Farm Payrolls Report to close higher for the day.
On the one hand, declining bond market activity and the persistence of low - risk arbitrage opportunities imply liquidity is impaired, while, on the other, low volatility and high demand
for risky assets suggest that liquidity is alive and well.
The April round of the State Street global investor confidence indexes showed institutional investors appear to be growing more confident on the
outlook for risky assets.
That will to some degree reliquefy the
market for riskier assets, but given that credit spreads have blown out for a wide variety of Asset -, Residential Mortgage -, and Commercial Mortgage - Backed securities, how much will 1/2 % on the discount rate do?
The recent
rally for riskier assets here in 2016 is similar to relief rallies in the past; that is, shorter - term gains often overshadow longer - term financial distress as well as deteriorating market internals.
Frazzini and Pedersen (2014) showed that leverage - constrained investors have a
predilection for riskier assets even though leveraging low volatility stocks would produce better results.
Meanwhile, investors increase their margin exposure to buy riskier assets and / or simply
opt for riskier assets...
Another of his ideas is that the seemingly - permanent increase in
valuations for risky asset classes is a valid response to «improvements in the way a market functions... which lead to reductions in the costs of those who use it.»
Renewed Demand
for Risky Assets Pumps Up U.S. Equities Renewed demand for higher risk assets helped to drive the March E-mini S&P 500 through the December high at 1126.50 to 1129.75.
Stocks Feel Pressure as Demand
for Risky Assets Falters U.S. equity markets closed lower on Tuesday as investors dumped higher yielding stocks in favor of safe - haven assets.
Stocks Rally on Increased Demand
for Risky Assets Global equity markets are rising overnight as traders increase demand for higher risk assets.
Since the strong rally starting in mid-February 2016, appetite
for risky assets appears to have increased, but market participants have been differentiating more on quality.
Firm Crude Oil Market Helps Trigger Late Session Equity Rally Stock index futures made new highs for the year as appetite
for risky assets picked up late in the trading session.
Commodity and Stocks Expected to Be Supported by Demand
for Risky Assets Commodity and stock prices are expected to continue to see support from investors demanded higher yields although short - term overbought conditions may limit upside action.
While the interest rates alone have not influenced stock prices, the unprecedented quantitative easing started a vicious cycle of risk - on / risk - off (RORO) that was the result of a binary
outcome for risky assets — either the easing works OR it doesn't.
Quant algorithms are designed to read market tranquility as a buy -
sign for risky assets — another bias of concern.
«We think that there has been an
overenthusiasm for risky assets and that the new valuations that have been reached are a little bit too optimistic,» Jamin said.
As the Fidelity analysts note, the $ 1.4 trillion unwind over the next 12 months will begin to challenge global liquidity growth, which has been a «key
support for riskier asset prices and lower volatility.»
The result: higher prices
for riskier assets like equities and tighter spreads for high yield and emerging market (EM) bonds.
Considering these dynamics, we find duration (a measure of interest - rate risk) to be somewhat more concerning today than in recent memory and the
prospects for risky assets will vary depending on how future duration moves are divided between breakevens and real rates.
The result: higher
prices for riskier assets like equities and tighter spreads for high yield and emerging market (EM) bonds.
Appetite
for riskier assets such as stocks and high - yield bonds has been suppressed by a number of factors that have come up around the same time, but the headwinds may be transitory, according to the New York - based investment bank.
Traders bought up shares early in the trading session as better than expected earnings reports from Travelerâ $ ™ s and McDonaldâ $ ™ s increased trader
demand for risky assets.
External US / UK deficits allowed private sector dissaving, generating a high demand
for risky assets (loans to households); and the corresponding net saving in the exporting countries was invested in the US and the UK and enabled the financing of the risky assets — the other side of the coin.
Furthermore, the Swiss Franc has grown in safe - haven appeal for many investors who are showing a growing appetite
for riskier assets.
Greenback Falls Despite Geithner's Call for Strong Dollar The U.S. Dollar finished lower, pressured by increased appetite
for risky assets, despite a call from Treasury Secretary Geithner for a stronger currency.
EUR USD Showing Strength on Reports of Impending Greek Rescue Appetite
for risky assets is helping to drive down the U.S. Dollar at the mid-session.
The strengthening April Gold market is a strong indication that the pact between the European Union and Greece is imminent, thereby driving up demand
for risky assets.
U.S. Equities Post Strong Gains on Renewed Interest in Higher Yielding Assets Confidence that the Greek budget deficit problem may be improving helped to drive up demand
for risky assets.