Risk-Off
A market sentiment regime where investors flee to safety — selling equities and high-yield assets in favor of government bonds, gold, and haven currencies.
Risk-off describes a market environment where fear or uncertainty drives investors to sell higher-risk assets and pile into safe havens. Classic risk-off moves: equities down, VIX up, Treasury yields down (prices up), yen up, dollar up (often), gold up, credit spreads widen.
Risk-off regimes can be triggered by recession fears, geopolitical shocks, central bank surprises, financial system stress, or a sharp deterioration in economic data. During deep risk-off episodes, correlations between assets converge — almost everything gets sold except the deepest haven assets.
Example
During the March 2020 COVID crash, equities dropped 35% in three weeks while the dollar surged, Treasury yields plunged, and gold initially sold off (liquidity crunch) before spiking to new highs as the Fed intervened.
Related Terms
Business Cycle
The recurring sequence of economic expansion, peak, contraction, and trough that drives sector rotation, earnings cycles, and asset class returns.
IntermediateCurrent Account
Broadest measure of a country's transactions with the world — trade in goods, services, income, and transfers — and a key driver of long-run currency valuation.
IntermediateHard Landing
The painful outcome when aggressive monetary tightening overcorrects and tips the economy into recession.
IntermediateRecession
A significant economic contraction — commonly defined as two consecutive quarters of negative GDP growth — that hits corporate earnings and risk assets hard.
BeginnerRisk-On
A market sentiment regime where investors favor higher-risk assets — equities, high-yield credit, commodities, and EM — over safe havens.
BeginnerTreasury
U.S. government debt securities issued by the Department of the Treasury — the global benchmark for risk-free rates and the deepest bond market in the world.
Beginner