Risk On / Risk Off

AmericaFirst added Risk On / Risk Off overlays to the Income, Defensive Growth and Seasonal Rotation funds in 2019 in response to under-performance in 2018.  These "overlays" are the result of hundreds of hours of extensive research whose sole purpose is to minimize downside when the investment markets free-fall.

What is Risk On / Risk Off?

Risk-on / risk-off is an investment setting in which

price behavior responds to and is driven by changes in

investor risk tolerance. Risk-on risk-off refers to changes in investment activity in response to global economic patterns. During periods when risk is perceived as low, the risk-on risk-off theory states that investors tend to engage in higher-risk investments; when risk is perceived to be high, investors have the tendency to gravitate toward lower-risk investments.

What are typical Risk On Assets?

Stocks are the most obvious, especially those with higher prices relative to profits, or in industries that are more dependent on economic growth. For bond investors, lower-rated but higher-yielding corporate and sovereign issues are considered “risk on” assets. 

What are typical Risk Off Assets?

The most typical Risk Off asset would be U.S. Treasuries. Among currencies, the yen and US Dollar tend to rally as investors unwind equity positions. Big gains in products tied to equity volatility indexes like the CBOE Volatility Index (VIX) are a sure sign of a risk-off market as investors bid up the price of options that protect against further losses in stocks.