Short-term risk in Axioma’s global multi-asset class model portfolio fell 0.77% to 6.02% as of Friday, Oct. 25, 2019, driven mostly by 1.5% decline in standalone equity volatility. At the same time, the current focus on political risk resulted in weaker correlations between share prices on one side and exchange rates and bond returns on the other, leading to offsetting effects on overall portfolio risk. While European currencies suffered from ongoing recession fears and Brexit uncertainty, the yen was largely unaffected, resulting in a generally reduced co-movement of equity and FX returns. The risk-lowering effect of this was, however, offset by a less inverse relationship between stock and bond prices, as sovereign yields decoupled across the different regions.
Please refer to figures 7-10 of the current Multi-Asset Class Risk Monitor (dated October 25, 2019) for further details.