What it is
Risk-on/risk-off is a market paradigm where investors collectively either embrace risk (risk-on) by buying higher-yielding, more volatile assets like stocks and commodities, or shun risk (risk-off) by moving into safer, less volatile assets like government bonds, gold, or the US dollar. This shift in sentiment is typically driven by changes in global economic outlook, geopolitical events, or central bank policies that impact investor confidence.
This sentiment often dictates overall market direction. During risk-on periods, growth stocks and emerging markets tend to outperform, while during risk-off periods, defensive sectors and safe-haven assets gain favor. Understanding this dynamic helps investors interpret broad market movements and sector rotations. News related to inflation, interest rates, or geopolitical stability frequently triggers shifts between risk-on and risk-off modes, affecting portfolio allocations.
Why it matters
Understanding risk-on/risk-off helps you interpret broad market movements and investor behavior. It indicates whether the market favors growth or safety.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice