Short-term risk in Axioma’s global multi-asset class model portfolio fell by half a percentage point to 6.33% as of Friday, March 8, 2019. The drop was mostly due to a more pronounced negative correlation between stock and bond markets, as investors fled share holdings for the relative safety of government bonds amid a flurry of discouraging economic news. The flight-to-quality movement boosted the risk-reducing properties of US fixed-income assets. Despite the stock market sell-off, equity factor volatility declined further. Non-US stocks saw the biggest absolute risk reduction, although part of the effect of the lower standalone volatility was offset by an intensified co-movement of share prices and exchange rates against the US dollar, as European currencies were hit by downward revisions in economic growth forecasts and ongoing Brexit uncertainty.
Please refer to figures 7-10 of the current Multi-Asset Class Risk Monitor (dated Mar. 8, 2019) for further details.