Goldman Sachs’ Risk Appetite Indicator (RAI) hit 1.09 on Tuesday, the highest level since 2021 and the 98th percentile since 1991. Seventeen of 27 inputs scored above 0.8 in z‑score terms, with gold as an outlier; excluding gold, the RAI would rise to roughly 1.2.

Investor sentiment has surged, reflecting a broad‑based risk‑on stance across global markets. The PC1 “Global growth” factor drove the uptick, and analysts note that only six instances since 1991 saw the RAI exceed 1.0. Historically, equities delivered positive returns in the following 12 months, though gains typically slowed after about six.

Goldman cautions that a high RAI alone does not signal a bearish turn; equity performance remains positive as long as the indicator stays elevated, with downside risk rising only when the RAI falls below zero. The firm stays modestly pro‑risk for 2026, overweighting equities and deploying selective hedges for upside and downside exposure.

Market watchers should track the RAI trend for early warning signs of a shift below 1.0, especially as policy and geopolitical uncertainty loom. Investors might consider hedging strategies to protect gains, while analysts expect continued bullish sentiment but caution that macro conditions could temper the upside. Monitoring gold’s outlier effect remains key.