S&P Global survey: Risk appetite is highest since January

The survey’s Risk Appetite Index is based on the net balance of respondents reporting an appetite for risk minus those reporting risk aversion, according to S&P Global, which notes that respondents reporting a ‘high’ risk tolerance or ‘high’ risk aversion are counted with a double weight. With that, the Risk Appetite Index rose for the first time in three months, climbing to +24% in August from +8% in July, according to S&P Global. About 43% of investors reported a risk-tolerant stance midway through the third quarter versus 39% in July and 4% cited a “high” risk appetite, marking the largest share of risk-tolerant investors since January. Meanwhile, those reporting risk aversion fell to 20%, from 28% in July and no respondents cited a “high” risk aversion for the first time in more than 4-1/2 years, according to the research. Risk appetite has climbed to its highest level since January when risk tolerance was close to record levels, according to the S&P Global Investment Manager Index August survey of just under 300 participants at firms that have a collective $3.5 trillion in assets under management. The firm says that sentiment has improved thanks to easing concerns about the impact of the war in the Middle East and an encouraging earnings season, according to its survey, conducted between August 1 and August 7. However, they cite central bank policy as a significant concern and the biggest drag on the market for more than three years due to interest-rate uncertainty. Views on the economy's health have also perked up and are "supporting equities to the greatest extent since February." While views on the U.S. economy are especially upbeat, they say, the broader global economy is also "perceived as providing support to U.S. equities for the first time in six months." Still, they say that "valuations remain a major drag" but with the perceived pull on equity appeal at the second-lowest level since late 2023. And the drag from the political environment – while the greatest of all factors – is the joint-lowest seen so far this year, according to the report. But central bank and fiscal policy are both seen as increased drags on the market in August, in particular due to "growing expectations of higher rates." However, under the hood, there was some nuance. Both mutual and non-mutual funds report risk-tolerant sentiment in August, with non-mutual funds returning to optimism after a risk-averse July reading. However, risk appetite is notably stronger among mutual funds, they said. While risk sentiment remains positive among both larger funds (with AUM above $1 billion) and smaller funds in the latest survey period, risk tolerance among larger funds is down to a three-month low. But by contrast, smaller funds are reporting their strongest risk tolerance since January, making them more risk tolerant than their larger counterparts for the first time in four months. And while risk tolerance has risen among investors in North America and the rest of the world, investors outside of North America were "considerably more risk tolerant than their North American counterparts." From a sector perspective, nine of the 11 major industry sectors tracked by the IMI received net bullish scores, reflecting more broad-based investor interest in August than at any other time since February. The war and rising oil prices have boosted appetites for energy and basic materials stocks during the month. And brightening AI-related sentiment has boosted interest in tech stocks sharply to approach survey peaks, they said. Improved interest-rate margin expectations have pushed financial stocks to the top of the investor rankings in August, while investor interest is also evident in healthcare, industrials, and communication services. But interest-rate worries have dampened appetite for real estate stocks, with the sector sitting at the foot of investor rankings for the ninth time in the past 10 months. And consumer discretionary is the only other sector to stay out of favor among investors, but they note "only a muted appetite" for consumer staples and utilities.

S&P Global survey: Risk appetite is highest since January

Risk Appetite Index jumps as aversion fades

Risk appetite rises to highest level since January

Sector preferences broaden, with energy and tech favored

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