Risk appetite and Momentum are crashing upwards.

Risk appetite and Momentum are crashing upwards.

GS reports the highest level in its Risk Appetite Indicator (RAI) since 2021 and the first time both RAI and Momentum have been this elevated since the start of 2000.

Historical data show that these levels often lead to a slowdown in equity returns.

In 3 of these episodes, equities entered a bear market in the following year, but the market peak followed much later.

Because of this "worse asymmetry" (limited upside vs. correction risk), Goldman currently suggests using put spread collars to limit downside while still participating in any lingering bullish sentiment.