(2025-05-15) Hunt The Death Of Risk
Ben Hunt: The Death of Risk. I think most of us are like Robert Frost. I know I am. When I think about how bad things might happen, how our world might end, I tend to imagine it in a series of mighty events like market crashes that explode like bombs and result in a blaze of destruction. That’s the romantic in me and Frost, imagining that we perish in fiery excitement. I suspect, though, that the far more common end is that we die in the bathtub.
Certainly that’s what stagflation is:
Economic death by slow, ignominious ice rather than quick, heroic fire. It’s not a crushing recession where everyone loses their jobs and a great wailing erupts across the land. It’s a long, gray slog where meager real growth feels like death, but you keep up appearances as best you can. Stagflation is a long gray slog where every day you feel more and more stretched … attenuated … because nothing is getting cheaper and every now and then you’ll be hit with a new price or an unexpected bill that literally takes your breath away.
Nothing has changed in people’s consumption behaviors.
Everything has changed in people’s risk-taking behaviors.
The US people are doing nothing in a profound way, by which I mean they are of course eliminating their risk-on behaviors like buying a new house or expanding their company or bankrolling nephew Gary’s start-up, but they are also NOT doing the typical risk-off behaviors like selling their stocks and going to cash or slashing the price on that rental house that’s been on the market waaay too long or telling little Johnny or Jenny that $100k for another year of ‘higher education’ at [checks notes] the University of Miami is just not in the cards.
I talk with so many people who are frozen in place, for whom ‘risk’ is less and less a meaningful concept. They’re extremely unsure about the future, so they don’t want to risk investing in anything new. But they also don’t trust the traditional safe havens like Treasuries
They’re averse to risk and they’re averse to risk-aversion! It’s a word without much meaning any more, and that’s why I titled this note The Death of Risk.
It’s a very weird place for an economy to find itself, where the entire idea of ‘risk’ gets obliterated because of an intentional erosion in the full faith and credit of the US government, and I think that all of our economic models and projections about what happens next are going to be wrong.
10-Year “Investors are Fleeing to X” Semantic Density (Raw Density)
This is a 10-year chart of the semantic density of investor narratives (what we call semantic signatures) concerning five “safety assets” — gold, money market funds, US Treasuries, the Swiss franc and the Japanese yen
What you’re seeing in this chart is that whenever there’s a market crisis or event that provokes risk-off and safe haven-seeking behavior, financial news media talks a lot about where that money is going.
The clear exception to this rule is our current risk-off, safe haven-seeking moment, where gold makes its usual appearance but US Treasuries and the Japanese yen are noticeably diminished from prior and similar risk-off moments.
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