Equity risk ticks-up in the US, Canada, Japan and Australia; Asset correlations climb in the US; Mexican peso strengthens against the US dollar
AXIOMA RISK MONITOR
MULTI-ASSET CLASS EDITION

Global curves invert, as economic concerns grow; Safe-haven currency risk continues to rise; Portfolio risk dips over flight-to-safety flows

 

HIGHLIGHTS FOR THE WEEK ENDED AUGUST 16

 
 

Global curves invert, as economic concerns grow

 

Long-dated US Treasury yields dropped below short-term interest rates in the week ending Aug. 16, 2019, amid a flurry of bad economic news from Germany and China. With 10-year bonds yielding less than 2-year issues for the first time in 12 years, the 30-year benchmark rate declined to its lowest level ever recorded, ending the week just above 2% and at the lower boundary of the Fed Funds target range. On the other side of the Atlantic, negative GDP growth in Germany and ongoing Brexit concerns also pushed 10-year government yields further below their respective central bank base rates.

20190218 first image.png

Please refer to figure 3 of the current Multi-Asset Class Risk Monitor (dated August 16, 2019) for further details.

 


Safe-haven currency risk continues to rise

 

Short-horizon risk for safe-haven currencies continued its ascent in the week ending Aug. 16, 2019. The Swiss franc hit its highest level against the US dollar in almost 11 months on Monday, as trade-war and recession concerns weighed on the American currency. Though the greenback recovered later in the week, predicted volatility for the CHF/USD and USD/JPY exchange rates remained at 6-month highs of around 5.55% and 5.90%, respectively. The British pound, on the other hand, saw its short-horizon risk fall by 0.09% to 7.43%, despite dropping to a 1.5-year low against the USD on Wednesday.




Please refer to figure 6 of the current Multi-Asset Class Risk Monitor (dated August 16, 2019) for further details.

 


Portfolio risk dips over flight-to-safety flows

 

Short-term risk in Axioma’s global multi-asset class model portfolio retreated slightly to 7.05% as of Friday, Aug. 16, 2019, compared with 7.43% the previous week, as strong bond-price gains offset stock-market losses. The increasingly negative interaction between the two major asset classes outweighed a more intense co-movement of share prices and foreign-exchange rates against the USD dollar. The decreases in percentage volatility contributions were most notable for US fixed-income assets, global sovereign and inflation-linked bonds and gold, which all saw their risk-reducing properties expand.


graph.png

Please refer to figures 7-10 of the current Multi-Asset Class Risk Monitor (dated August 16, 2019) for further details.



 
 
Stay Connected
 
 

Webinars

Webinar | Axioma Insight™ Q2 2019 Multi-Asset Risk Review

Date: August 28, 2019
Time: 11:00 AM (ET) / 4:00 PM (BST)

The constant change in market focus over the past months has led to a sharp decrease in cross-asset class correlations. Join Christoph V. Schon, Axioma's Executive Director of Applied Research, in this webinar to learn more about how these different environments have affected the overall risk of multi-asset class portfolios.

Register here.


Axioma Financial Intelligence Summit: London 2019

Date: October 30, 2019

Join us for a full day of expert presenters, illuminating presentations and thought-provoking discussion. The full event agenda and speaker line-up will be announced shortly.

Register here.


Axioma Financial Intelligence Summit: New York 2019

Date: November 20, 2019

Join us for a full day of expert presenters, illuminating presentations and thought-provoking discussion. The full event agenda and speaker line-up will be announced shortly.

Register here.


 
 

On the Blog


Do Yield Curve Inversions Impact Factor Performance?

A client recently asked an intriguing question: “Do style factors behave differently after a yield-curve inversion?” One might think they would, but that turned out not to be the case.

Succumbing to Sentiment - Axioma ROOF™ Scores Provide Insights into an Abrupt Market Turn

The US market fell 3% overnight and the implied volatility from the VIX shot up to 22%. We use ROOF™ Scores to attempt to see how this could have happened.

 
 
 

Latest Research

Is Your Smart Beta Product Scalable?

In this paper, we use the backtester capabilities of the Axioma Portfolio Optimizer to investigate the maximum capacity of a smart beta strategy, based on the Profitability factor in the Asia ex-Japan equity market. Profitability is one of the style factors in the Axioma Asia Pacific ex-Japan fundamental factor model (v4) that has had a persistently positive return over the last several years, and has become a popular style tilt with regional managers.

 

In the News

Central banks might start going to an easing cycle, analyst says

Volatility is back and people have to deal with it, says Olivier D’assier, head of applied research, APAC at Axioma.

 

Axioma Risk Monitor

A Weekly Report on Market Risk

The Axioma Risk Monitor reports use Axioma’s solutions to bring you insights on trends in market and portfolio risk. You can subscribe to both the multi-asset class and equity edition here.

 
 
 
 

MiFID II Statement: Axioma believes that the research we provide falls outside the purview of the MiFID II regulations, which are intended to provide transactional transparency and unbundle research and trading costs. Axioma does not provide recommendation research, is not a regulated company and our business is not transactional. As such, we do not believe that we are subject to MiFID II regulation.

Axioma  17 State Street, 2700    New York  NY  10004  United States