Risk-Off / Risk-On

Risk-Off and Risk-On describe the prevailing market regime by the direction of capital flows. In risk-on, money moves into equities, credit, cyclicals and emerging markets as appetite rises; in risk-off, it retreats to havens such as Treasuries, the US dollar, gold and the yen as appetite falls. It is a cross-asset description, not an equity-only one.

It matters because the regime is the master variable that many other signals depend on. A breakout, a momentum tilt or a credit trade can behave very differently depending on whether capital is being put to work or pulled back, so reading the regime first helps avoid acting on a signal that only works in the opposite environment.

Identifying which regime dominates is the central task of Closelooknet's Money Temperature framework, which reads market breadth together with cross-asset confirmation from the dollar index, credit spreads and the VIX.

In practice, a session where equities fall, the dollar and Treasuries are bid, and gold rises is a textbook risk-off day; the cleaner the agreement across assets, the more confidently the regime can be labelled.