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Risk-On Risk-Off (RORO)

Risk-On Risk-Off (RORO) is an investment sentiment or trading strategy that reflects how investors shift between riskier and safer assets based on their perception of market risk. During "risk-on" periods, investors are more willing to take on risk, allocating capital to equities, commodities, and high-yield bonds. Conversely, during "risk-off" periods, investors seek safety in assets such as government bonds and gold. RORO is driven by changes in economic data, geopolitical events, and market volatility.

Example

In a "risk-on" environment, investors may move into stocks and commodities as they anticipate economic growth. In contrast, during a "risk-off" phase, they may sell these assets and buy safe-haven assets like U.S. Treasury bonds.

Key points

Reflects shifts between riskier and safer assets based on market sentiment.

In "risk-on" periods, investors favor equities and high-yield assets; in "risk-off" periods, they seek safety in bonds and gold.

Driven by changes in market volatility, economic data, and geopolitical events.

Quick Answers to Curious Questions

Changes in economic outlook, market volatility, and geopolitical risks often trigger shifts in investor sentiment between riskier and safer assets.

During "risk-on" periods, equities and riskier assets rise, while during "risk-off" periods, safe-haven assets like bonds gain in value.

Government bonds, gold, and other safe-haven assets generally perform well during "risk-off" periods when investors seek stability.
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