Beginner
What It Means
A continuous score answers “how much?”; a regime answers “which kind of market is this?”. The five labels translate the sentiment score into a decision-relevant state, from strongly risk-averse conditions, where defense is being rewarded, to strongly risk-seeking conditions, where risk-taking is being paid.Example
In a Risk-On regime, rallies find buyers, credit is easy, and bad news gets shrugged off. In a Risk-Off regime, the same headline that was shrugged off last month now knocks the market down, because the underlying appetite for risk has changed, not because the news got objectively worse.Why It Matters
Markets behave differently in different regimes, correlations, volatility, and the reward for defensive positioning all shift. Knowing the regime is a prerequisite for judging how much risk a portfolio should carry.Advanced
How to Read It
The labels mean what they say: risk-on regimes are environments rewarding risk-taking; risk-off regimes reward defense; the “strong” variants mark conviction extremes where contrarian instincts also deserve a hearing.Designed Stability
The classification uses separate entry and exit thresholds to reduce frequent switching near regime boundaries. Read a regime change alongside the underlying score and its recent trajectory.Common Misreadings
- Treating the regime as a market forecast: it describes the current risk-appetite environment, not where prices go next
- Ignoring the “strong” extremes’ double meaning: Strong Risk-On confirms the trend and simultaneously flags crowding, the reports read the extremes with both eyes open
- Missing the component story: the same regime label can be driven by liquidity, momentum, or breadth, and the reports say which, the driver matters as much as the label
In the Reports
The liquidity and sentiment section names the market’s regime each week, and the global cross-asset report aggregates country readings into a single global risk-appetite regime, one answer to “is the world risk-seeking or risk-averse this week?”Related Terms
Composite Market-Sentiment Score
The score being classified
Breadth
A component of the score
Psychological Wavelength
Sentiment in the positioning framework