Risk-On Sentiment Falters For Global Asset Allocation Strategies
The appetite for risk has taken a hit in recent weeks, although the worst of the selling has, so far, been contained to US stocks, on a year-to-date basis. The rest of the primary markets around the world, by contrast, are still posting gains so far in 2025, based on a set of ETFs through Friday’s close (Mar. 14). The relative strength in markets outside the US has helped global asset allocation strategies remain relatively resilient. But with the mood souring due to the rising risk of a global trade war, confidence about the near-term future is vulnerable.
For some perspective on where the pressure is building, let’s start with a big-picture review of an aggressive posture for global asset allocation vs. its conservative counterpart, based on ETF proxies. The risk-on sentiment by this measure has clearly taken a hit lately, with the ratio sliding decisively below its 200-day moving average for the first time since last September. But the near-term strength of the risk-on signal is open for debate for this top-down strategy as long as the 50-day average for the ratio remains above its 200-day average, as it still does.