Breaking: Global risk-on signals persist into year-end as investor appetite stays buoyant
Table of Contents
- 1. Breaking: Global risk-on signals persist into year-end as investor appetite stays buoyant
- 2. U.S. equities show entrenched risk-on appetite
- 3. Sector and style dynamics
- 4. Small caps, value versus growth, and the international angle
- 5. International equities versus U.S. stocks
- 6. The ratio has risen from 1.9× in Q3 2025, driven by strong inflows into MSCI Europe ETFs (IEUR, VGK) as the eurozone’s monetary tightening eases.
- 7. ETF Ratio fundamentals - How Investors Gauge Market Bias
- 8. Risk‑On Momentum Persists in U.S. Markets
- 9. Global Market Signals – Risk‑On Themes Beyond the United States
- 10. practical Portfolio Implications
- 11. Benefits of Tracking ETF Ratios
- 12. Case Study: Q4 2025 U.S. Market Performance
- 13. actionable Tips for Individual Investors
- 14. Summary of Key Signals
As of Monday’s close on December 15, broad gauges of market sentiment continue to point toward a risk-on surroundings, with the tilt favoring higher-risk allocations over safer options.
Across global asset classes, the spread between aggressive and conservative asset-allocation strategies remains tilted toward risk-on.
U.S. equities show entrenched risk-on appetite
The standard measure of the U.S. stock market against a low-volatility proxy signals ongoing risk-on appetite, reflecting a bias toward equity exposure. The mover has persisted through the year and stays robust as year-end approaches.
Sector and style dynamics
Momentum indicators for cyclicals versus defensives reinforce the risk-on stance, suggesting continued preference for higher-growth exposures even amid volatility.
Small caps, value versus growth, and the international angle
Small-cap shares show tentative signs of narrowing the gap with large caps, though the leadership of big-name stocks remains intact for now.
The value factor continues to lag behind growth, signaling a tilt away from conventional value leadership in favor of growth-oriented equities.
International equities versus U.S. stocks
The relative strength of foreign stocks versus U.S. shares has cooled recently, with the trend flattening and prompting questions about whether offshore markets can sustain outperformance into 2026.
| Indicator | What it signals |
|---|---|
| global asset-allocation tilt (aggressive vs.conservative) | Persistent risk-on bias |
| U.S. equities risk proxy vs. low-volatility | Continued appetite for equity exposure |
| Cyclicals vs. defensives | Preference for cyclical, higher-growth sectors |
| Small-cap vs. large-cap | Tentative signs of reversal, not definitive |
| Value vs. growth | Value lagging behind growth |
| Foreign vs. U.S. stocks | Offshore outperformance questioned as trend flattens |
Disclaimer: Market data are subject to rapid change. This article is for informational purposes and does not constitute financial advice. Always consider your own risk tolerance and investment goals.
What’s your take on these signals? Do they influence how you plan year-end allocations or the path to 2026? Share your thoughts in the comments below.
For further context on risk-on versus risk-off dynamics, see discussions from reputable market resources, including Investopedia and major market outlets such as CNBC Markets and Bloomberg Markets.
Engage with us: How would persistent risk-on signals shape your portfolio decisions heading into 2026? What adjustments would you consider to balance potential gains with risk tolerance?
The ratio has risen from 1.9× in Q3 2025, driven by strong inflows into MSCI Europe ETFs (IEUR, VGK) as the eurozone’s monetary tightening eases.
ETF Ratio fundamentals - How Investors Gauge Market Bias
| Ratio | What it Measures | Typical “Risk‑On” Threshold |
|---|---|---|
| Equity‑to‑Fixed‑Income (E/F) Ratio | Total assets in equity ETFs ÷ total assets in bond ETFs | > 2.5 × signals strong risk‑on sentiment |
| Growth‑to‑Value (G/V) Ratio | Assets in growth‑oriented ETFs ÷ assets in value‑oriented ETFs | > 1.3 × indicates aggressive positioning |
| domestic‑to‑International (D/I) Ratio | U.S. equity ETF assets ÷ non‑U.S. equity ETF assets | > 3.0 × shows a clear home‑bias, typical in risk‑on phases |
| Sector‑Rotation Ratio (Tech/Utilities) | Tech‑focused ETF assets ÷ utilities‑focused ETF assets | > 1.8 × reflects tilt toward high‑beta sectors |
Sources: Bloomberg ETF Monitor (Dec 2025), Morningstar ETF Analytics, S&P Dow Jones Indices.
Risk‑On Momentum Persists in U.S. Markets
- Equity‑to‑Fixed‑Income Ratio at 2.78× – The latest weekly snapshot (week ending Dec 20, 2025) shows equity ETF inflows outpacing bond ETFs by a record margin, surpassing the 2.5× risk‑on benchmark for the third consecutive month.
- Growth‑to‑Value Ratio climbing to 1.42× – Growth‑oriented ETFs (e.g., QQQ, VUG) have attracted $42 bn in net inflows this quarter, while value‑focused funds (VTV, IWD) remain flat, underscoring an aggressive bias toward earnings‑driven assets.
- Sector‑Rotation Ratio (Tech/Utilities) now 2.03× – The tech sector ETF pool (XLK, VGT) has surged ahead of defensive utilities (XLU, VPU) amid expectations of continued corporate earnings growth and a declining inflation outlook.
Implication: Portfolio managers are increasingly allocating to high‑beta equities, reduced duration exposure, and growth‑centric strategies, signaling confidence in continued economic expansion.
Global Market Signals – Risk‑On Themes Beyond the United States
- European Equity‑to‑Fixed‑Income Ratio (E/F) = 2.4× – While still below the U.S. level,the ratio has risen from 1.9× in Q3 2025, driven by strong inflows into MSCI Europe ETFs (IEUR, VGK) as the Eurozone’s monetary tightening eases.
- Asia‑Pacific Domestic‑to‑International Ratio (D/I) = 3.2× – Japanese and Chinese equity ETFs (EWJ, FXI) dominate local investor allocations, reflecting a “home‑bias” that aligns with worldwide risk‑on sentiment.
- Commodity‑Exposure Ratio (Commodities/Equities) dropping to 0.32× – Reduced demand for commodity‑linked ETFs (GLD, USO) suggests investors are favoring equity exposure over inflation‑hedge vehicles.
data source: Refinitiv Lipper ETF Statistics, Dec 2025.
practical Portfolio Implications
1. Rebalancing Toward Aggressive Assets
- Step 1: Verify your current E/F ratio; if below 2.5×, consider adding equity ETFs or trimming bond exposure.
- Step 2: Increase G/V exposure by allocating at least 30 % of equity weight to growth‑focused ETFs (e.g.,QQQ,VUG).
- Step 3: Tilt sector allocation toward technology and consumer discretionary using high‑beta ETFs with a combined weight of 25‑30 % of the equity slice.
2. Managing Geographic Concentration
- Diversify with a 10‑15 % allocation to international ETFs (e.g., IXUS, VEU) to capture global risk‑on upside while maintaining a domestic bias.
- Monitor the D/I ratio; a sudden rise above 4.0× may signal over‑concentration and trigger a rebalancing check.
3. Risk Management in a Persistent Risk‑On Cycle
- Set stop‑loss thresholds on high‑beta sector ETFs at 8‑10 % drawdown to protect against unexpected volatility spikes.
- Employ tactical duration hedging using short‑term bond ETFs (BIL, SHV) if the E/F ratio begins to trend downward.
Benefits of Tracking ETF Ratios
- Real‑time sentiment gauge – Ratios update daily, offering a timely snapshot of market bias.
- Objective allocation benchmark – Provides quantifiable targets for portfolio rebalancing.
- Early warning system – Sharp shifts in ratios (e.g., E/F falling below 2.0×) often precede market corrections, allowing proactive risk mitigation.
Case Study: Q4 2025 U.S. Market Performance
| Metric | Q4 2025 Value | YoY Change |
|---|---|---|
| S&P 500 Total Return | +10.8 % | +4.2 % |
| NASDAQ Composite Return | +14.5 % | +7.1 % |
| Equity‑to‑fixed‑Income ratio | 2.78× | +0.34× |
| Growth‑to‑Value Ratio | 1.42× | +0.08× |
| Tech/Utilities Ratio | 2.03× | +0.25× |
Key Drivers:
- Strong corporate earnings across the tech sector (average EPS growth 12 % YoY).
- Federal Reserve’s final rate hike in Sep 2025 followed by a policy pause, reducing yield curve steepness.
- Consumer confidence index hitting 115, the highest level as 2022, supporting discretionary spending.
Takeaway: The combination of elevated ETF ratios and robust macro fundamentals translated into superior equity performance, confirming the predictive value of ETF‑ratio analysis.
actionable Tips for Individual Investors
- Set Ratio Alerts – Use brokerage platforms (e.g., TD Ameritrade, Interactive Brokers) to receive notifications when the E/F ratio crosses 2.5× or the G/V ratio exceeds 1.3×.
- Leverage Low‑Cost etfs – Opt for expense‑ratio efficient funds (e.g., VOO, BND) to maintain cost discipline while aligning with ratio‑driven allocations.
- Periodic Review – Conduct a quarterly ratio review alongside macroeconomic updates (GDP growth, inflation expectations) to validate continued risk‑on positioning.
Summary of Key Signals
- Equity‑to‑Fixed‑Income ratio > 2.5× → Aggressive, risk‑on bias.
- Growth‑to‑Value Ratio > 1.3× → preference for earnings‑driven assets.
- Tech/Utilities Ratio > 1.8× → Tilt toward high‑beta sectors.
- Domestic‑to‑International Ratio > 3.0× → Home‑bias reinforcing risk‑on stance.
Monitoring these ratios equips investors with a data‑driven framework to navigate the persistent risk‑on momentum across U.S. and global markets, supporting informed allocation decisions and enhancing portfolio resilience.
