Risk off refers to a market sentiment where traders and investors become more cautious and less willing to take on risk. In such environment, there is increased uncertainty or pessimism about the economy, leading market participants to sell risky assets and buy safer, more stable investments. This typically occurs when there is negative economic news, geopolitical instability, or other factors that create fear in the markets.
The opposite of risk off is known as risk on. The two terms are often used together to describe global market sentiment. This concept is also referred to as "RORO" (Risk On, Risk Off).
Typical risk off assets include U.S. Treasuries, German bunds, the Japanese yen, the Swiss franc, and gold. These assets are viewed as stable and low-risk during periods of uncertainty.
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