Chart Of The Day: Risk Appetite Hits All-Time High

Are you celebrating? You should be.

Because as you’re acutely aware, we’ve gone 395 trading days without a 5% pullback, the longest streak in recorded history:

To put it mildly, 2018 has gone well for risk assets. In fact, the MSCI AC World has had its best start to a year ever in data going back to 1987. And on a risk-adjusted basis, it’s a “well, fuck me runnin'” type of deal:

 

Speaking of the MSCI World, it too has gone the longest on record without a 5% drawdown:

 

Meanwhile, bonds have gotten off to an abysmal start, with 10Y Treasurys posting their worst performance through January 19th in history as yields spike amid jitters on global demand (e.g. China) and questions about what the ballooning deficit will entail for Treasury’s borrowing needs (i.e. increased supply at a time when the Fed is stepping away from the market):

 

So all of those visuals are super-fun, but for the chart of the day, we bring you the latest read on Goldman’s risk appetite indicator which is now at its highest level on record amid… well… amid a voracious appetite for risk:

 

Does that bode poorly? Not necessarily. According to Goldman, “while high-risk appetite increases risk of disappointment, we find historically that the signal from macro data tends to trump the signal from risk appetite.”

That’s all fine and good but remember: all three times banks, energy shares, and big cap tech sold off by 1% or more on the same day in 2017 the market was worried about something to do with Trump.

So if you’re looking for what “trumps” all signals, well, “the buck stops here”: