A risk-on / risk-off strategy adjusts how much risk a portfolio takes as conditions change. When the evidence is favorable, it leans toward growth-oriented assets. When conditions deteriorate, it shifts toward more defensive positioning. The goal isn’t to predict where markets go next; it’s to respond to what the evidence shows, consistently.

What do “risk-on” and “risk-off” mean?

Investors use the terms to describe the market’s appetite for risk. In a risk-on environment, investors are willing to own higher-risk assets, such as stocks, emerging markets, and lower-rated bonds. In a risk-off environment, they move toward assets they see as safer, such as high-quality government bonds and cash.

How does a strategy decide which way to lean?

A systematic strategy decides in advance which evidence it weighs and how much each piece counts. That evidence can include market trends, economic and earnings data, valuations, volatility, and credit conditions. No single signal decides. The weight of the evidence moves the posture, often in steps rather than all at once.

What does a shift look like in a portfolio?

It is rarely all in or all out. A portfolio keeps a core allocation that fits the client’s goals and tolerance for risk, and adjustments happen around that core. A more defensive posture might mean less exposure to the most volatile markets and more to high-quality bonds or cash, added back as conditions improve. The client’s plan sets how far a portfolio can move.

What are the trade-offs?

  • Evidence takes time. A process that waits for evidence will rarely sell at the top or buy at the bottom.
  • Markets can reverse. A shift in one direction can be followed quickly by a move the other way.
  • Changes have costs. Each adjustment can bring trading costs and, in taxable accounts, capital gains.
  • Rules only help if they’re followed, especially in the moments when following them feels least comfortable.

Why use rules instead of judgment alone?

Emotion is one of the most persistent risks investors face. Fear and optimism tend to peak at the worst times. Rules set in advance ask the same questions in calm markets and turbulent ones. People still matter: they build the rules, test them, and oversee how they’re applied.

How Barrett Capital applies it

Global AI® is Barrett Capital’s proprietary, systematic investment process. It applies quantitative models, including artificial intelligence and machine learning, to fundamental and macroeconomic data across global markets. When the weight of evidence is favorable, portfolios can lean toward growth-oriented assets. When conditions deteriorate, the process can shift toward more defensive positioning. Our investment professionals develop, evaluate, and oversee the process, and every portfolio reflects the individual client it serves.

Frequently asked questions

Is this the same as market timing?
Both change exposure over time, but market timing usually means trying to predict short-term moves. A rules-based posture responds to evidence that is already visible, within limits set by your plan. It doesn’t avoid losses or guarantee results.
How far can my portfolio move?
That depends on the limits set for your portfolio. We explain the range of positioning for your situation before you invest.

General educational information, not individualized investment advice. Investing involves risk, including loss of principal. A systematic process does not guarantee results or protect against loss.