Our global strategy team have highlighted that our proprietary global risk appetite index is now in oversold, or panic territory. Risky assets have underperformed safe assets over the past six months to the point where they may be starting to look interesting from a contrarian point of view. Indeed, our strategists are of the view that although the indicator is registering panic, they do not feel as though the real world is panicking. After all, timely measures of global growth are still positive, albeit less so than at the start of the year.
For what it is worth, our global strategists are advocating mean reversion. They believe that risk appetite will converge higher to the positive pace of world growth. And from an Australian point of view, this would mean:
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Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
