Hello, my name is Marija Veitmane, and I'm Head of Equity Research at State Street Markets. In this short presentation, I'm going to take you through State Street risk appetite indicators. And we start with broad message.

Risk appetite is back.

In June, the broad measures of market turbulence have declined. Our proprietary measures of market turbulence are low, as well as traditional measures of market volatility like Wicks. How did institutional investors respond to those quieter times? With a bank, they added risk to their portfolio. Indeed, we have seen a very broad-based risk-taking as our risk appetite index has remained elevated for the second month in a row.

In June, institutional investors added risk to their positions in stocks, commodities, foreign exchange, as well as asset allocation. Now, let's dive into the details. The first point to make is more risk-seeking asset allocation. Institutional investors have started this year with very large allocation to stocks relative to bonds and cash, and those positions have been unwound in Q1. But since April, they were coming back, and indeed, in June, allocation to stocks has gone past the start of the year level as institutional investors were reallocating from cash into equities. Secondly, what drives those allocations? Which stocks are investors buying? And indeed, it is US stocks and specifically US technology stocks.

We have seen a very sharp increase in appetite for technology stocks pretty much since the start of Q1 earnings season. That was a peak of kind of maximum uncertainty and huge pessimism towards US. And we've seen company after company pulling away the corporate guidance and saying the uncertainty is huge. They don't know how much money they will make and when and what trade policies will be. Tech CEOs were rare examples of confident management that stood up and said our demand for our product is still very strong. We are confident in our CapEx plans. We confirm our guidance and companies met expectations, and institutional investors saw technology stocks potentially as a kind of support of safety in those really turbulent times.

And since then, we really have only seen a handful of days where investors were not buying IT stocks. So very, very consistent demand for tech stocks that translated fairly quickly into buying of US stocks more broadly, as those are dominant stocks.

What is really important to understand is that despite this very strong buying of technology stocks for the last few months and very strong performance of those stocks, investors are still far below the peaks we've seen at the end of last year, about 20% below. So this buying has quite a lot of room to continue.

Where is the money coming from in equities? It's once again, European stocks. So at the start of the year, we had this really strong positive sentiment towards Europe as hopes for looser fiscal spending were propelling investor sentiment. Unfortunately, those hopes still remain just hopes, as earnings expectations are really not increasing in European companies.

And what institutional investors have done, they closed the underweight positions they were running for over a year, somewhere towards the end of Q2. And since then, we've seen consistent outflows from European stocks, both continental Europe and UK. And the majority of those outflows were once again in more crowded stocks like financials. We also have seen outflows from Germany, Spain, the larger countries that performed far better. So overall, the sentiment is quite US-centric. Unfortunately, the improvement in sentiment to US stocks is really not translating into broader appetite for other US assets. We continue to see strong selling of US dollar and treasury. And really importantly to note is that the selling of US dollar and US treasuries is coming at a period where investor holdings in both of those assets are extremely underweight. So despite those low positions, investors are really not tempted to go and buy US dollar and treasuries.

To summarize, overall risk appetite is back.

We see strong buying of risky stocks.

We still see buying or preference for riskier currencies.

We see appetite for commodities as well, perhaps spurred by increased prices and volatility following Middle East escalation and investors adding risk to their asset allocation.

Where are those positions?

The most elevated they are in terms of holdings. Holdings are largest in stocks.

Still, there are some big positions in commodities, but overall allocations—holdings in risky assets—are not high by historical standards.

So there is hope that this risk appetite can persist.

Thank you very much and good luck in July.

Bye-bye.