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

Stock and bond investors once more at odds on trade news
Pound slumps on bad PMI data
Portfolio risk unchanged, as diverging investor views offset lower equity volatility

 

HIGHLIGHTS FOR THE WEEK ENDED NOVEMBER 22

 
 

Stock and bond investors once more at odds on trade news

 

Global sovereign yields fell, while share prices hardly budged, in the week ending November 22, 2019, as equity, fixed-income and FX traders appeared once again to have different takes on the latest US-Chinese trade negotiation news. Bond investors seemingly took a more cautious approach, with the 10-year US Treasury rate retreating to its lowest levels since the start of the month, following a report on Wednesday that the eagerly anticipated “phase one” deal may not be signed before early next year. This raises the possibility of additional tariffs, which are scheduled to take effect on December 15, if President Trump does not feel that enough progress has been made by then. Stock markets, on the other hand, largely ignored the news, while the dollar even ended the week slightly stronger against most of its major rivals.

20190218 first image.png

Please refer to figure 4 of the current Multi-Asset Class Risk Monitor (dated November 22, 2019) for further details.

 


Pound slumps on bad PMI data

 

The British pound fell 0.6% against the US dollar in the week ending November 22, 2019, after purchasing manager index data released on Friday indicated the steepest contraction in the UK services sector since July 2016. Meanwhile, its manufacturing counterpart recorded the seventh consecutive month of negative growth, as companies reversed their stock building ahead of the missed October 31 Brexit deadline. The pound’s move erased most of the previous week’s gains, as the data once more highlighted the effect of the ongoing economic uncertainty created by the repeated Brexit delays and the upcoming general election.




Please refer to figure 6 of the current Multi-Asset Class Risk Monitor (dated November 22, 2019) for further details.

 


Portfolio risk unchanged, as diverging investor views offset lower equity volatility

 

Short-term risk in Axioma’s global multi-asset class model portfolio remained almost unchanged at 4.53% as of Friday, November 22, 2019, as the benefits of lower equity and interest-rate volatility were offset by a less inverse interaction of share and bond prices and a stronger co-movement of stock markets and exchange rates against the USD. This meant that a reduction in the risk contribution from US equities was counteracted by a similar increase for non-USD bonds. The change in the interrelationship of the major asset classes reflects a divergence in how the respective investors interpret the most recent reports on the progress of the trade negotiations between China and the US.


graph.png

Please refer to figures 7-10 of the current Multi-Asset Class Risk Monitor (dated November 22, 2019) for further details.



 
 
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Webinar | Qontigo Insight™ Quarterly Multi-Asset Risk Review

Date: November 26, 2019
Time: 11:00 AM ET | 4:00 PM GMT

Join Christoph V. Schon, Qontigo's Executive Director of Applied Research to hear how the ensuing “flight-to-quality” flows and low exchange-rate correlations affected portfolio risk and diversification.

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Webinar | Qontigo Insight™ Quarterly Insight Review, APAC

Date: December 11, 2019
Time: 10:00 AM HKT | 11:00 AM JST

In this webinar, Olivier d'Assier, Qontigo's head of applied research for APAC, will review the key drivers of market risk year-to-date and discuss the outlook for risk in December 2019 and Q1 2020.

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Webinar | Qontigo Insight™: Look Back, Look Ahead

Date: December 12, 2019
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In this webinar, Melissa R. Brown, Managing Director of Applied Research at Qontigo, will examine the year-to-date and Q4 drivers of risk, and provide an in-depth analysis of factor performance.

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