What is Risk-on / Risk-off?

Risk-on and risk-off describe the market's mood. In risk-on phases, investors buy growth assets — stocks, crypto, emerging markets, commodities. In risk-off phases, they flee to safety — government bonds, the US dollar, gold, cash.

Many assets move together within these regimes, which is why correlations change with the mood of the market.

Recognising whether the market is in a risk-on or risk-off phase helps explain why seemingly unrelated assets suddenly move in step.

By Dr. Harry Hamann