Risk Appetite at elevated levels
Equity inflows YTD are at all-time highs and positioning and sentiment broadly have picked up. Goldman: the asymmetry of adding risk is worse and there is more vulnerability to shocks. We have not seen such a huge inflow into equities in one quarter for more than 20 years. Equities receive all help that they could get. Central banks supporting with liquidity, Governments throwing money at households, and they are buying equities. Risk appetite is at elevated levels, but it might stay that way for a while.
Are we heading towards “Goldilocks scenario” – not too hot, not too cold? We might, says Goldman. The drivers of risk appetite have changed YTD – growth optimism has surged, while rising bond yields have led to an easing of the search for yield. This is likely to continue, with strong growth momentum into Q2. If the bond sell-off eases, it might create opportunities in long-duration assets and carry strategies. Welcome Goldilocks.
One of the main themes lately (although it does not "feel" that way) is that markets have oscillated rather big, but there is a lack of overall direction. Equity "fear" continues lower with VIX and V2X printing new post corona lows practically.
Setting up for interesting long premium plays soon...
Are we heading towards “Goldilocks scenario” – not too hot, not too cold? We might, says Goldman. The drivers of risk appetite have changed YTD – growth optimism has surged, while rising bond yields have led to an easing of the search for yield. This is likely to continue, with strong growth momentum into Q2. If the bond sell-off eases, it might create opportunities in long-duration assets and carry strategies. Welcome Goldilocks.
One of the main themes lately (although it does not "feel" that way) is that markets have oscillated rather big, but there is a lack of overall direction. Equity "fear" continues lower with VIX and V2X printing new post corona lows practically.
Setting up for interesting long premium plays soon...