This All Star Charts +Plus Monthly Playbook breaks down the investment universe into a series of largely binary decisions and tactical calls. Paired with our Weight of the Evidence Dashboard and our Playbook Chartbook, this piece is designed to help active asset allocators follow trends, pursue opportunities, and manage risk.
In Focus for September: That there is little appetite for risk among investors has been evident all year. Despite bounces in March and May and even during the rally from mid-June to mid-August, our longer-term risk indicator has remained in the Risk Off zone. The challenge from an asset allocation perspective is that while Risk Off assets have been generally stronger than Risk On assets, there is not a lot of strength there on an absolute basis. Our Risk Off - Risk On Range-O-Meter captures this. That the components of our US Risk On Index (shown below in green) have weakened and are nearing their 52-week lows probably comes as no surprise. While the US Risk Off Index components (shown in red) are, on average, holding up better, there is plenty of weakness there as well. Staples and Utilities (relative to the S&P 500) are strong and at or near new highs. The Yen, Treasuries and Gold, however, are at or near new lows. While it is a Risk Off environment, adding exposure to these traditional safe havens would be going against the trend and brings with it risks of its own. These remain the most challenging waters I have navigated in my career.
