When investors are in a risk off mindset: Here are the 5 moves they usually make and why

Last week’s strike by Israel on Iran led to a Friday led to the typical risk off moves investors usually make when faced with uncertainty.

Few would’ve predicted Israel would’ve struck Iran at the exact time at it did, and it caught investors off guard. They either had no time to ask questions, or were more determined to later. You never knew when something will arise that could impact the global macroeconomic environment, and thus listed equities, and thus individual companies investors own.

 

5 risk off moves investors make when faced with uncertainty

Sell equities

Well, most of them. See the last point.

But generally, equities are more risky than other assets. And so in times of uncertainty (e.g. economic slowdown, geopolitical tension, rising interest rates), investors prioritise not losing money over making high returns. Equities in sectors like tech or small-cap stocks, are more volatile because they are more risky.

Investors prefer holding cash or highly liquid assets to maintain flexibility and reduce exposure to downward moves.

 

 

Buy gold (and sometimes other precious metals)

Gold (and other precious metals like silver or platinum – the latter is actually better than gold in 2025 so far) doesn’t always rise instantly in a risk-off event. It may fall early if investors are desperately raising cash (such as to meet margin calls) or fleeing to other assrts like the U.S. dollar.

But over the medium term, as the panic settles and any policy responses kick in, gold often outperforms. This is for many reasons including that it can be used as a store of value because unlike fiat currencies, it’s not subject to the same risks from inflation, devaluation, or central bank policy. Physical gold isn’t dependent on a third party to maintain its value (unlike stocks or bonds, which rely on companies or governments).

Gold is priced in U.S. dollars, so when the dollar weakens (often the case in risk-off when the Fed signals dovishness), gold tends to rise. Conversely, when the dollar strengthens aggressively (as in a dollar liquidity crunch), gold may initially fall before rebounding.

Gold is particularly attractive when real interest rates (nominal rates minus inflation) fall or go negative – such as in 2020 – because it has no yield and if investors don’t care about yield, there’s no need to seek it.

 

Sell crypto

Cryptocurrencies like Bitcoin and Ethereum are extremely volatile — large price swings are common. And so in risk-off environments, investors reduce exposure to volatile assets and seek stability in liquid, safe assets like U.S. Treasuries, the U.S. dollar, or gold. Crypto markets can become illiquid during sharp selloffs, making them less appealing when liquidity is paramount.

Now, we know stocks are risky, but at least stocks have some tangible fundamentals (i.e. a balance sheet and sometimes earnings). This is not true with respect to crypto.

Despite early claims that Bitcoin is “digital gold,” crypto has shown high correlation with tech stocks and high-beta assets during risk-off periods. Get back to us when crypto rises in the event of market uncertainty.

What’s more is that crypto markets are often highly leveraged. So in a risk-off scenario, forced liquidations (margin calls, liquidations of collateral) can accelerate selling pressure in crypto markets. Risk-off periods may also highlight vulnerabilities in the crypto ecosystem — such as exchange risks (e.g., FTX), DeFi exploits, or regulatory crackdowns.

These concerns lead investors to exit crypto until stability returns.

 

Buy bonds

When investors are in a risk-off mindset, they often buy bonds — especially U.S. Treasuries (most prominently the 10-year yield) — because these assets are seen as safe, reliable, and stable during periods of uncertainty.

Bonds (especially government bonds) are less volatile than stocks, they offer fixed interest payments and their prices rise when rates fall. And so Bonds often move inversely to stocks during market stress.

U.S. Treasuries Are Particularly Sought After because they are backed by the full faith and credit of the U.S. government. They are considered virtually default-risk free, especially short-term Treasury bills.

The U.S. Treasury market is the largest and most liquid bond market in the world. U.S. Treasuries are denominated in U.S. dollars, the world’s reserve currency. During global turmoil, international investors often flee to dollar-denominated assets.

Treasuries serve as the benchmark risk-free rate for pricing virtually all other financial assets. Institutional investors and central banks use Treasuries as a core reserve asset.

 

Rallying to stocks that may benefit

Now it is true that stocks generally sell off when investors are risk-off. But some sectors are considered defensive and can outperform or hold up better during risk-off periods. These include consumer staple stocks like supermarkets, utility providers, healthcare stocks and gold mining stocks. Why? Demand for the goods/services of the first 3 tend to be relatively stable regardless of economic conditions. And as for the latter, even though gold miners can be impacted by macroeconomic conditions, higher gold prices are a good situation for them.

But of course even these sectors can still decline in a broad market selloff — even if they may fall less or recover more quickly. Moreover, individual stock performance within sectors can vary based on company fundamentals, balance sheet strength, and exposure to global markets.

 

Conclusion

When investors are in a risk-off mindset, those 5 actions happen almost every time. So don’t be surprised when you see them.

 

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