The notion of risk-on/risk-off is so tempting to believe in. But it’s rote nonsense and always has been. There is no lever traders and fund managers pull each day where they all decide today is a “risk on” or “risk off” day.
There are millions of separate interests and views affecting the markets, all days, always. That correlations sometimes go up, and sometimes go down tells you nothing about how anything is likely to behave moving forward. Non-serial auto-correlation has been a fact of investing life basically forever no matter how volatility and correlation spikes or quells.
Also, what’s risky changes! What’s risk today is different than perceived risk a few years ago. Remember when the euro was the safest place to be? Now it’s a risk asset!
Don’t be fooled by this stuff—market cycles see changes in leadership and periodic corrections. Volatility and correlation will do the same.