Macro | Psychology
Risk-on / Risk-off
"The Risk-on / Risk-off paradigm describes phases where global investors alternate between risky assets (equities, crypto) and safe havens (gold, bonds, USD, JPY)."
In-Depth Definition
The Risk-on / Risk-off (RoRo) model describes phases of the global risk appetite cycle. In Risk-on mode, investors favor high-yield but risky assets: equities (especially tech and emerging markets), cryptocurrencies, industrial commodities, and high-yield currencies (AUD, NZD). In Risk-off mode, they retreat to perceived safe assets: US Treasuries, gold, Japanese yen (JPY), Swiss franc (CHF), and the US dollar. Transitions between modes are often triggered by macro events (financial crises, surprising economic data, central bank decisions, geopolitical tensions). Understanding the dominant regime allows adaptation of allocation and strategies.
StarQuant Insight
StarQuant monitors real-time macro sentiment indicators (VIX, credit spreads, bond yields, cross-asset correlations) to detect Risk-on/Risk-off transitions and automatically adapt strategy selection filters.
Pro Tip
During Risk-off periods, beware of unusual correlations: normally uncorrelated assets can fall together (correlation toward 1). This is why nominal diversification can be illusory during crises — the only true hedge is liquidity or safe-haven assets.