Short-term risk in Axioma’s global multi-asset class model portfolio rose from 7.61% to 7.73% as of Friday, Feb. 22, 2019, as a ‘dovish’ Federal Reserve Bank report led to a co-movement of share prices, bond valuations and foreign-exchange rates against the USD. The increase occurred despite a further drop in equity volatility, as a downward revision in US interest-rate expectations resulted in a dollar depreciation, which, in turn, amplified foreign stock and bond market gains. The risk increase was particularly evident in the non-US government-bond bucket, which was affected by a less negative correlation with share prices and a stronger positive interaction with non-USD securities. US Treasuries also saw their diversification benefit curtailed, but still marginally reduced overall volatility.
Please refer to figures 7-10 of the current Multi-Asset Class Risk Monitor (dated Feb. 22, 2019) for further details.