Risk Assets
Investments whose returns are uncertain and vary with market conditions — including equities, corporate bonds, crypto, and commodities. They tend to rise when liquidity is ample and fall when it tightens.
The macro regime is unambiguously STAGFLATION DEEPENING, with the activation of 'Operation Epic Fury' representing a genuine geopolitical regime break that has moved the Hormuz risk from tail to base case. The dominant market narrative for the next 2-6 weeks is the US-Iran military confrontation: Tr…
What Are Risk Assets?
Risk assets are financial instruments whose future returns carry meaningful uncertainty. The category includes equities, high-yield corporate bonds, emerging-market debt, commodities, and cryptocurrencies. They are contrasted with "safe haven" assets like US Treasuries, gold, and the US dollar, which investors flock to during periods of stress.
What Drives Risk Assets?
The single most important driver of risk asset performance is liquidity — the amount of cash circulating in the financial system. When central banks ease policy (via rate cuts or quantitative easing), liquidity expands and risk assets tend to rally. When policy tightens (via rate hikes or quantitative tightening), liquidity contracts and risk assets face headwinds.
Other key drivers include:
- Growth expectations: Improving economic data supports equities and commodities
- Credit conditions: Tightening lending standards hurt riskier borrowers first
- Sentiment and positioning: Extreme fear (measured by the VIX, put/call ratios, or the Fear & Greed Index) can signal contrarian buying opportunities
- Dollar strength: A strong DXY index tends to weigh on commodities and EM assets
Risk-On vs Risk-Off
Markets oscillate between "risk-on" regimes (where investors chase higher returns in risky assets) and "risk-off" regimes (where capital flows to safety). Identifying these regime shifts early is one of the core functions of macro analysis.
Risk Assets is one of the signals monitored daily in the AI-driven macro analysis on Convex Trading. The platform synthesises data across monetary policy, credit, sentiment, and on-chain metrics to generate actionable trade recommendations. Create a free account to build your own signal layer and see how Risk Assets is influencing current positions.