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Some data, such as initial jobless claims and the Conference Board leading indicator, have been disappointing.All this has led to a sell-off of the "risk basket"—those assets that seem most correlated with global growth, such as the Australian dollar, copper and emerging-market equities (see chart 1).
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Importantly, almost all of our sources put forward the concept of portfolio theory: Don't put all your eggs in a high-risk basket, they advise.
Over the past two weeks, the risk-trade basket has had the worst of it: the Australian dollar, for example, fell by 6% against the yen in the course of just four days.Asset-allocation decisions are becoming more complex, too.
Many will want to cap the net risk of a basket of exposures, if not individual risks such as fire or fraud.
Second, that time-honored adage: Dont put all your risk in one basket.
The advent of stock-index futures provided a way to hedge risk on broad baskets of stocks.
The pilot and the passenger who survived quickly escaped over the side of the basket, risking a 30-foot fall.
In areas of food insecurity, increased calories are vital, but it's dangerous for the same reason – investment experts tell us – to diversify our financial holdings: putting all our eggs in one basket increases risk.
It is also a problem for ordinary investors who have traditionally tried to protect their portfolios by spreading risk over a broad basket of assets, so that if some go down in price, others will increase.
PRUDENT investors learned long ago that putting your eggs into lots of baskets reduces risk.
But as an opportunity to reflect it may be welcome.An energy portfolio, like any other, is a basket of risks: of security of supply, cost and environmental damage.
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CEO of Professional Science Editing for Scientists @ prosciediting.com