Risk-On Risk-Off

Risk-On Risk-Off refers to investor and trader behaviour in relation to changing market sentiment. Sentiment can and does change frequently based on a number of factors: political news, macroeconomic data releases or Black Swan events like Covid-19. During bouts of risk-on, investors and traders are more willing to buy riskier securities for the extra return, while during risk-off periods, fixed-income investors will switch to highly-rated and liquid government bonds or solid investment-grade corporate bonds or put on hedges, focusing on return of capital rather than return on capital. Investors with mixed mandates, meanwhile, may rebalance from equities to bonds.