The global equity market recovery continued in the third quarter, as benchmark risk slid. But not all components of risk participated in the decline, and volatility remained much higher than it was when the year started.
For many weeks, investors and market commentators have been puzzled by the apparent “disagreement” between the stock and the bond markets over the expected shape of the economic recovery. The sharp rebound of share prices seemed to indicate that equity investors foresee a swift, V-shaped comeback. The ultra-low, or even negative, yields and flat curves […]
Much of the recent market turmoil has been driven by worries about debt. Granted, debt is not a bad thing, per se. But the fact that many households and corporations must now borrow extensively just to stay afloat is a major concern. This is reflected in both wider credit spreads and the fact that the […]
In many of our recent blog posts and webinars, we noted how the COVID-19 crisis had disrupted the long-established co-movements and interactions of major asset classes. Some flipped signs, many broke down, and a few remained remarkably stable. In this blog post, we take a look at some of the most notable asset-class pairs. 1. US dollar versus […]
Investing in oil as part of a multi-asset strategy can be risky for two reasons: first, the oil price is very volatile, and, second, because it is usually strongly correlated with the stock market. For example, though the market-value weight of the oil holding in Qontigo’s global multi-asset class model portfolio is only 2%, it […]
The recent decision by the Federal Reserve Bank to add high-yield funds to its asset-purchasing program triggered unprecedented flows into exchange-traded funds specializing in sub-investment grade securities. At the same time, newly issued debt from recently downgraded issuers was greeted by record demand. Does this mean that investors are betting on a swift recovery and […]
The first quarter of 2020 came in roaring like a lion and went out like a (slaughtered) lamb. After stock indices were pushing new records in the first half of the quarter, the bloodbath in equities that followed not only ended the longest-running bull market in the US history, but also threw indices worldwide into a bear market.
As share prices plummeted in late February and early March, corporate-bond risk premia exploded at rates not seen since the aftermath of the Lehman Brothers default. So far, spreads of financial institutions have essentially moved in lockstep with the overall market. This contrasts sharply with the global financial crisis and the Eurozone debt crisis, during […]
The extraordinary market movements over the past few weeks have thrown long-established cross-asset class correlations into disarray. The worldwide scramble for USD cash meant that traditional safe havens, such as government bonds, the Japanese yen, the Swiss Franc and even gold, dropped in value, as stock markets tumbled. In other words, conventional diversification strategies have […]
In times when “all correlations go to one”, some asset classes are hit harder than others. In a “normal” flight-to-quality environment, corporate bonds are likely to benefit from lower risk-free rates, which offset at least part of the higher risk premia. For securities with better credit quality, this may even result in a positive overall […]