Risk on / risk off
Kereon's −1 to +1 reading of whether money is leaning toward risk — small caps, junk bonds, discretionary spending — or away from it today.
Formula
Risk appetite = mean of the available votes, each clipped to −1…+1
Inputs
- Small caps. Russell 2000 fund (IWM) % change − S&P 500 fund (SPY) % change.
- Credit. High-yield bond fund (HYG) % change − long Treasury fund (TLT) % change.
- Discretionary. Consumer discretionary fund (XLY) % change − consumer staples fund (XLP) % change.
- VIX. −(the VIX's % change) ÷ 8.
- Breadth. (% of desk stocks advancing − 50) ÷ 30.
How to read it
Above +0.15 reads Risk ON, below −0.15 Risk OFF, in between Neutral. A reading near ±1 means every vote agrees.
How to use it
Checks whether the day's move has appetite for risk underneath it. An index rising while defensives and Treasuries lead — Risk OFF — is a narrower, more fragile advance than one led by small caps and credit.
Limitations
Every vote is a one-day relative move, so one large print in one fund can swing it. A vote with no data drops out, so early in the morning the reading may rest on fewer inputs.
In Kereon
Market · Pulse. Recomputed with every desk snapshot; the five votes carry equal weight. The bars under the tile draw each vote before its ±1 clip.
Also called: risk appetite, risk on, risk off, risk-on, risk-off.