Strong Risk Trends Tend to Align Benchmarks Like SPX, USDJPY

When an underlying drive of risk trends - either appetite or aversion - is fueled by conviction, it is a market-wide sentiment. When the appetite for return or fear of loss grows increasingly more extreme, the need to reposition spreads to all corners of the financial system.

So how strong is 'risk appetite' today? Rather than using the S&P 500 or any other individual benchmark, a correlation between two very different market leaders - SPX and USDJPY - suggests we are not being driven by certainty at the moment. The 20-day correlation between the two has slipped into negative territory.