A State of Complacency
The Citi Macro Risk Index, calculated based on credit spreads, swap spreads, and implied volatility on major asset classes, is often used to measure risk aversion in global financial markets. This index has tracked closely with the S&P 500 over the past few years, however, the correlation broke down in January of this year. Despite an increasing level of macro risk driven by uncertainties in the eurozone, U.S. equity indices continue to climb to new highs.
S&P 500 INDEX VS. CITI MACRO RISK INDEX