Two Types of Market Emotions: Risk Appetite and Risk Aversion
When risk appetite rises—as with US equities or non-US currencies like the euro, which are favored by investors—there is a high probability of generating alpha. Conversely, when safe-haven sentiment strengthens, currencies with safe-haven attributes like the US dollar tend to become investors' preferred choices.
Typically, we associate risk-on sentiment with a strong economy and safe-haven sentiment with a weak economy.
Investing is never about betting; it's about calculation. You must calculate losses before gains, accounting for every parachute and safety cushion.
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