Institutional investors surge back into risky assets, State Street Markets reveals

By Newsdesk

May 11 2026
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In a striking turnaround, institutional investors have demonstrated a renewed appetite for risk, according to the latest data from State Street Markets. The firm's Institutional Investor Indicators report, released on May 8, 2026, highlights a significant shift in investment behaviour, with demand for risky assets soaring across all classes in April. This resurgence follows a brief sell-off in March, attributed to geopolitical tensions.

Institutional investors surge back into risky assets, State Street Markets reveals

The State Street Risk Appetite Index, a barometer for gauging investors' willingness to embrace risk, surged in April. This shift in sentiment has led to institutional investors amassing an unusually large balance of extreme positions in risky assets. The most pronounced impact of this risk appetite is evident in the increased allocation to equities, primarily funded by a reduction in cash holdings, traditionally considered the safest asset class.

Allocations to stocks rose by 2.1 percentage points, more than offsetting the previous month's decline. This substantial monthly increase is a rare occurrence, having been seen only a few times since the index's inception in 1998. Marija Veitmane, Head of Equity Research at State Street Markets, provided insights into this trend, noting the resilience of economic and earnings expectations despite ongoing geopolitical tensions. "The initial de-risking by institutional investors at the onset of the Iran war has proven short-lived. Despite ongoing hostilities and still-elevated oil prices, markets are pricing a limited duration, with volatility already back to pre-war levels," Veitmane explained.

The strong earnings backdrop within the equities sector has been a key driver of this risk-taking behaviour. Veitmane highlighted, "Somewhat counterintuitively, 2026 earnings expectations have risen since the war began, driven by upgrades in Energy (higher oil prices) and IT (persistent AI demand)." Investors have been quick to capitalise on these trends, increasing their allocations to the IT sector, where earnings are both robust and visible.

Regionally, this shift has resulted in significant flows into US equities, funded by a broad-based reduction in positions elsewhere. European stocks have faced the heaviest selling pressure as investors question the resilience of profits in a higher oil price environment. However, Asian tech-rich indices, such as those in Korea and Taiwan, continue to attract strong demand, reflecting confidence in their growth potential.

In the foreign exchange market, the US dollar, which served as a safe haven in March, has seen its appeal wane in April. "In the FX market, the USD was the preferred safe haven choice in March. However, dollar buying has reversed in April with positioning quickly reaching bottom quartile," Veitmane noted. Investors have instead rotated into higher-beta emerging market and commodity currencies, while also rebuilding positions in carry trades.

This shift in sentiment extends to fixed-income markets, where there is improving demand for emerging market bonds and high yield credit. This move underscores investors' willingness to seek higher returns in riskier assets, driven by favourable economic and earnings expectations.

The report from State Street Markets comes at a time when global markets are navigating a complex landscape of geopolitical tensions, fluctuating oil prices, and evolving economic conditions. The renewed appetite for risk among institutional investors highlights their confidence in the resilience of the global economy and their ability to adapt to changing market dynamics.

As the investment landscape continues to evolve, market participants will be closely monitoring these trends and adjusting their strategies accordingly. The insights provided by State Street Markets offer valuable guidance for investors seeking to navigate the complexities of today's financial markets, emphasising the importance of staying informed and agile in the face of uncertainty.

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