Monetary policy in emerging markets Equity market outlook Property market outlook Bond markets Investment Insights Foreign currency markets Opportunity to Invest Foreign Currency Citibank Mortgage Plus Citibank Plus Investment insights Risk sentiment and global equity markets Over the last decade, the Risk-on, Risk-off (RoRo) trade has been a consistent feature of global equity markets. A RoRo phase is characterised as a period when the MSCI AC World Index (MXWD) rises or falls by at least 10%, without a 10% move in the other direction. With the exception of the low volatility rally seen from 2004 to 2006, during which global equity markets rallied by almost 120% without a 10% pullback, there was plenty of RoRo before and afterwards. With uncertainty continuing to hang over the investment outlook and hence the potential for investor sentiment to swing from bullish to bearish, we may not have seen the end of RoRo just yet. MSCI AC World Index Total Return (USD) during Risk-On and Risk-Off Phases Source: MSCI, Citi Investment Research and Analysis. As of March 28, 2012 There have been eight episodes since 2010 when global equities, as measured by the MSCI AC World Index (MXWD), have moved at least 10% higher or 10% lower. In almost every year in the last decade, there has been at least one 10% pull-back in stock prices per year. The exceptions have been 2004 and 2005. We currently appear to be in the midst of a risk-on rally, with the MXWD having rallied about 20% from the Nov 2011 lows. *Risk score = Proportion of times an index/sector outperforms during risk-on phases less proportion of times an index/sector outperforms during risk-off phases. A score of +1 implies perfect risk-on characteristics, i.e. an index which has always outperformed during each of the risk-on episodes and has always underperformed during the risk-off periods. A score of -1 implies perfect risk-off characteristics, i.e. an index which has always underperformed during each of the risk-on episodes and has always outperformed during the risk-off episodes. Source: MSCI, Citi Investment Research and Analysis. As of March 28, 2012 Sectors with a high risk score have typically outperformed during risk-on phases and underperformed during risk-offs. Cyclical sectors like Financials, Materials and Industrials have a high risk score. Conversely, sectors with a low risk score have typically outperformed during risk-off phases and underperformed during risk-ons. Traditionally defensive sectors such as Consumer Staple, Health Care and Utilities feature here.

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