Atlas Macro

Markets

Risk-Off

A market mood in which investors cut exposure to risky assets (shares, high-yield bonds, emerging markets, commodities) and move money into safe havens. Its opposite, risk-on, is when investors favour riskier assets in search of higher returns.

Key points

  • Risk-off: shares and credit fall, government bonds rally, and the dollar, yen, Swiss franc and gold tend to rise.
  • Risk-on: shares rally, credit spreads narrow, emerging markets do well and volatility falls.
  • Shifts are driven by central bank policy, growth fears, geopolitical shocks and liquidity events.

Example

A sudden shift from risk-on to risk-off can see shares fall several percent, high-yield spreads widen by around 100 bps and Treasury yields drop sharply within a few days.

In history

In March 2023, as Silicon Valley Bank failed, US shares fell about 5% in a week, the VIX jumped from about 19 to 26 and high-yield spreads widened by around 100 bps, while Treasury yields fell sharply as markets priced out further rate rises.

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