Tariff tensions and macro fears send risk appetite to a four-month low
Investor optimism has taken another hit this month following a brief return for risk appetite in July.
The latest S&P Global Investment Manager Index reveals a sharp swing back toward risk aversion with its Risk Appetite Index plunging to -20% in August from +12% the previous month, marking the lowest reading since April, when US tariff announcements rattled markets.
The report notes that “the latest decline also marked a return to risk aversion following a brief period of risk tolerance in July.”
Heightened anxieties over both macroeconomic and political conditions, compounded by trade tensions, have weighed on expectations for near-term equity returns.
Valuations remain the biggest drag on equities, but the survey highlights a “noticeable intensification” in concerns about the global and US macroeconomic outlook.
Investor sentiment has been further clouded by uncertainty over the Federal Reserve’s policy trajectory, with central bank policy now seen as a neutral factor rather than a supportive one.
“Investor sentiment has visibly weakened at the start of August digesting the slew of tariff developments since July, including the implementation of higher tariffs for major US trading partners and the announcement of new tariffs on chips towards the tail-end of the survey period,” says Jingyi Pan, Associate Director at S&P Global Market Intelligence and author of the report.
“There has been a souring of perceptions towards both the US and global macroeconomic environments, while the potential tariff-related impact on inflation has also invited investors to wipe away their previously held optimism towards central bank policy in supporting US equity performance,” adds Pan.
Despite the caution, earnings expectations have improved since the previous quarter.
“Despite the looming challenges posed by tariffs and economic uncertainty, the significant drop in bearish sentiment among North American investors from 47% to just 13% reflects a growing confidence in earnings growth,” says Mohammad Hassan, Equities Dividend Forecasting Director at S&P Global Market Intelligence and co-author of the report.
A more durable signal on this nascent shift in investor sentiment will materialize once the last of tariff related deals are done.”
Sector preferences also show a defensive tilt with utilities and consumer staples were the only sectors to see a higher net balance compared to July, while financials retained the top spot, followed closely by communication services and IT.
Sentiment toward both financials and tech moderated, reflecting the impact of tariff announcements, including a 100% chip tariff. Consumer discretionary stocks remained the least favored, with bearish sentiment intensifying.
