Years ago there was a TV commercial about a kids’ toy called Weebles, which “wobbled but they don’t fall down.” The line comes to mind in reviewing recent market activity. Since returning to the White House last month, President Trump has outlined a wave of policy changes, plans and comments that have roiled markets and shaken expectations about the economic outlook. But for the moment, the latest squalls of volatility have come and gone, leaving an upside trend that’s a bit battered but mostly intact.
As usual in these periodic updates to assess the crowd’s appetite for risk, I’m looking at a set of ETF pairs — in this case, using data through yesterday’s close (Feb. 5). For a big-picture perspective consider the ratio for an aggressive global asset allocation mix (AOA) vs. its conservative counterpart (AOK). Despite recent turbulence, the trend remains the same: positive in a non-trivial degree.
The to-and-fro is more pronounced when focusing on US stocks, but the ratio of the broad market-cap-weighted market portfolio (SPY) vs. a low-volatility alternative (USMV) has rebounded sharply.
Turning to the relative performance of US shares vs. foreign counterparts in developed markets suggests the American bounceback has gone too far too fast. The ratio for VTI (a proxy for the total US equities market) vs. its developed-market ex-US counterpart (VEA) surged recently in favor of American stocks. Using history as a guide suggests caution in expecting the relative outperformance for the US to continue in the degree of late.
Turning to US Treasuries, the case for favoring relatively shorter maturities (SHY) over longer maturities (IEF) still looks prudent.
The IEF:SHY ratio, after a brief reprieve, remains negative. Perhaps the peak in yields is behind us, but for now, this ratio is still suggesting a cautious view on going further out on the maturity curve.
Finally, here’s a quick look at US stocks (SPY) relative to a broad measure of US bonds (BND). Most of the time this ratio trends higher, reflecting the superior performance of stocks through time. At times, however, this ratio takes a hit, which usually signals trouble for a risk-on worldview. At the moment, this indicator remains solidly in risk-on terrain.
The last bout of substantial volatility struck last August. So far in 2025, there’s been a relatively mild run of turbulence, but risk-on sentiment wobbled but has yet to fall down.