Risk Appetite Ratios

The following ratios have proven to give a good estimate of risk appetite among investors

Note : Shaded areas represent the 5% & 95% percentile on the charted data.


How much are investors believing in “Global growth” ?They have until the crisis, and during the early recovery.Recently, this ratio has significantly weakened.
Cons. Cyclical vs Defensive - 3Y The consumer has not fully recovered, even thought there has been a steady improvement since early 2009.Recently weakening, but a lot of potential
Cons. Cyclical vs Defensive - Max
A surprisingly accurate leading ratio : spots the 00s’ top and bottoms, warns of the weakening economy in mid 2007, and spot the 2009 bottom very nicely.
Growth vs Value - Max
Strength in value stocks traditionally shows risk appetite, as this type of company usually have weaker balance sheets.Recently this ratio has been quite uninformative.
Small Caps vs Large Caps - Max
Analysis is not so straightforward. In theory, small caps are riskier than large caps, so this ratio constantly decreasing from 93 to 99 is surprising.
Sotheby's vs SP-500 - 3Y Still showing strength, but slowing down. As explained below, the Sotheby’s ratio is not that useful for tops, as it’s too early.
Sotheby's vs SP-500 - Max Is there a more cyclical business than Sotheby’s ?As can be seen from this long-term chart, the Sotheby’s / SP-500 ratio has done an excellent job at spotting major bottoms, however it’s not that great for tops – too early (2000 top spotted in 1999, 2007 a bit early)



Corporate Bonds vs Treasuries - Max  Excellent at picking the 2009 bottom.As of now, appears to show strength.
Junk Bonds vs Corporate Bonds - 3Y Showing strength
Junk Bonds vs Corporate Bonds - Max  Overall one of the best : early and accurate measure of impending trouble (mid 2007), good bottom picker for 2009. According to this, the economy is still healthy and improving
Equities vs Bonds - Max A classic one. Shows a normal, mid-cycle risk appetite.

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