The Goldman Risk Appetite Indicator (RAI) has continued to defy expectations, reaching new heights despite a tumultuous week for global markets. According to data released by Goldman Sachs on Thursday, the RAI remained elevated and even reached new highs of 1.09, the highest level since 2021 and the 98th percentile since 1991.

This remarkable resilience in the face of increased policy and geopolitical uncertainty is a testament to the market’s confidence in the global economy’s ability to weather these challenges. The RAI is calculated based on a combination of factors such as credit spreads, equity volatility, and option prices, providing a comprehensive view of investor risk appetite.

The recent surge in the RAI can be attributed to several factors. Firstly, central banks have continued to provide support for the global economy through accommodative monetary policies, which has helped to boost investor confidence. Secondly, the ongoing recovery in the global economy has also contributed to the increase in risk appetite, as businesses and consumers become more optimistic about future growth prospects.

However, it is important to note that this increased risk appetite does not necessarily mean that investors are taking on excessive levels of risk. The RAI remains well within a historically normal range, indicating that investors are still cautious but willing to take on some level of risk in pursuit of potential returns.

The implications of this increased risk appetite are far-reaching and could have significant impacts on global markets. For example, it could lead to increased volatility in asset prices as investors become more aggressive in their investment strategies. It could also lead to a shift in the balance of power between different asset classes, with some assets potentially outperforming others.