The recent strength in the U.S. dollar and stock market weakness has the media believing we are in “risk-off” mode. However, the reality is quite different. We are far from capitulation, or even significant risk reduction.
It is true that we have seen record outflows out of equity funds recently, but that is more a function of the Federal Reserve reducing its balance sheet and raising interest rates. But outflows are not a complete signal of risk-off mentality. They show mostly a modest reduction in excessive optimism.
