Short-term risk in Axioma’s global multi-asset class model portfolio rose by 0.43% to 4.93% as of Friday, May 17, 2019. A sharp uptick in standalone equity volatility added almost a percentage point to the overall risk, although more than half of it was offset by a more negative interaction between share prices and foreign-exchange rates against the US dollar. The latter also translated into an increased diversification benefit. At the same time, gold became more negatively correlated with the stock market, which meant that the precious metal significantly curtailed overall portfolio volatility, alongside other safe-haven assets, such as government and investment-grade corporate bonds and the Japanese yen. The biggest risk reduction came from non-US sovereigns, which further benefitted from the inverse FX/equity relationship.
Please refer to figures 7-10 of the current Multi-Asset Class Risk Monitor (dated May 17, 2019) for further details.