12/02/2015
Aversion to risk peaked in late 2014
p { margin-bottom: 0.1in; line-height: 120%; } The market regime indicator (MRI) from State Street Global Advisors had a mixed year in 2014. After a start to 2014 dominated by low aversion to risk and euphoria regimes risk aversion reached peaks in the last quarter of 2014, placing the MRI into the high aversion to risk and then into crisis territory, State Street explains. In October, the MRI moved into the high aversion to risk regime, due to concerns related to the euro zone economy, a fall in the price of crude oil, low household consumer spending figures in the United States, and a panic related to the Ebola virus in Africa. These events led to the liquidation of high-risk assets, largely in equity markets, triggering the MRI crisis regime for a few weeks. The MRI pulled out of crisis in November, due to better-than-expected results for third quarter, an increase in US GDP, and interventions by the Fed and the Central Bank of Japan. “The market regime indicator nonetheless finished the year in the crisis regie, as market players had to confront multiple challenges in 2015: quantitative easing by the ECB, Greek elections, geopolitical risks related to escalating Ukrainian and Russian crises, and events in the Middle East. The fall in the oil price is also expected to have an impact on emerging markets, particularly on countries that produce commodities,” State Street says.
