Risk appetite among investors counts for a great deal, so the fact that the State Street Risk Appetite Index remained in positive territory in September, continuing a five-month run of upbeat sentiment, reveals a positive investor sentiment picture.
Indeed, last month’s reading equaled July’s 2025 peak, as investors continued to embrace risk.
The State Street Holdings indicators show that long-term investor allocations across equities, fixed income and cash were essentially unchanged though September.
This illustrated that, even as global yield curves steepen, investors are not yet being tempted back into duration assets, with fixed income allocations remaining meaningfully light compared with their long-run averages.
This concurs with State Street’s broader sentiment measures which show that real money investors continued to embrace higher-beta assets, that is to say risk, during September.
“Despite heightened geopolitical uncertainty in a number of major economies, somewhat mixed economic data, and growing valuation concerns across a raft of pro-risk assets, our broad measures of risk appetite continued to show strong positivity through September,” said Lee Ferridge, head of macro strategy in the Americas at State Street Markets.
Within the month, the asset allocation weight to equities, the riskiest class of assets, was virtually unchanged; while the same is true for allocations to cash and fixed income assets.
Investors are overweight risk and, happy to remain that way.
And Ferridge added: “Equity markets continue to make fresh all-time highs seemingly every day and, volatility measures remain subdued. This positivity was clearly boosted by the US Federal Reserve lowering interest rates in September for the first time this year, whilst also signaling that it would ease a further two times before 2025 is done, an extra cut compared with the message provided in June.”
Ferridge also noted: “The sentiment reading from our across asset Behavioral Risk Scorecard shows the 3-month moving average for sentiment at its most positive since January 2021. Political, economic and valuation concerns abound but, for now at least, investors are happy to ride the positive price wave.”
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