The assets that represent this portfolio strategy include stocks, commodities, high yield bonds, real estate and currencies. The alternative to a risky environment is called “risk aversion”. This occurs when investors reduce risk and investor confidence becomes bearish. Investors are starting to sell risky assets and focus on protecting their assets.
When market participants are optimistic about the economic outlook. The price of the riskiest assets will rise. It's easy to see the upward trend in a risky environment, as the stock market continues to rise and set new all-time highs. During a risky market, investors can sell bonds and invest in stocks to participate in the overall growth of the market.
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