Investors turn defensive in January as rate cut expectations change

State Street Risk Appetite index

Institutional investors’ risk appetite has fallen from 0.18 to -0.09 in January as they re-evaluated the pace of rate cuts this year, according to the State Street Risk Appetite Index.

Demand for risky assets across equity, fixed income and FX markets fell in January. In equity, investors preferred defensive relative to cyclical sectors, as well as quality stocks, whereas in fixed income, there was more demand for developed market and core sovereign bond markets. However, there was still interest in high yield corporate bonds. The firm noted this shows investors are not yet "too concerned" about credit. FX markets experienced more USD buying, at the expense of emerging market currencies. Equity funds gather highest inflows in three years as investor confidence...