Risk-On, Risk-Off
I saw something interesting in the WSJ that I don’t quite understand. “Two assets, the S&P 500 and the euro’s value against the dollar, tend to rise when investors are optimistic. Two others, the yield on 10 year treasury’s and the dollars value against the Japanese Yen tend to fall when investors grow skittish. “Can anyone help me understand this phenomenon?
S&P 500 is pretty self explanatory, it goes up when investors are bullish as the underlying assets go up.
Treasury yields go down when investors are bearish because there is more demand for safer investments like bonds. (bond prices and yields are inverted)
The FX changes have to do with interest bearing assets and depending on the countries' interest rates the euro or dollar (or Yen) will be more attractive to investors + whatever the trade matrix is.
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