Portfolio Risk Management

Treasury yields hold steady, as Fed reassures markets; High-yield bonds outperform, as share prices rise; Decreased cross-asset diversification offsets lower equity risk.

Global country and style risk remain elevated; Asset diversification plunges in the US; Turkish lira’s risk surges.

US markets seem in Déjà vu mode with sentiment following a similar pattern of recovery. European investor sentiment leads other regions to the top of the neutral zone. Global and Asia ex-Japan investor sentiment recovery settles in the Neutral zone.

The first quarter of 2021 provides an excellent opportunity to see how investor sentiment—as measured by the Sector ROOF ratio—can be leveraged in a market under a rotation scenario.

Foreign-exchange rates can be very volatile. Investors looking to bet on markets outside their own base currency must decide whether to embrace or mitigate the additional risk. In this paper, we propose a stress-testing framework that can help investors with the decision whether “to hedge or not to hedge”, given their assumptions on expected returns and cross-asset correlations.

Treasury yields climb to 14-month highs over fiscal funding concerns; Both the dollar and share prices climb amid rising risk appetites; Portfolio risk falls, as FX losses offset equity gains.

Risk rises in the US, but nowhere else; Factor volatility is low compared with recent history, but not longer-term; Value’s strength evident across markets.

Helped by the repeated promise of continuous stimulus from the Fed and the Biden administration, US investor sentiment began to stage a rebound from deep in bearish territory, to the edge of the neutral zone (top chart). In recent weeks, a deteriorating sentiment had capped market’s advances, but that downward pull seems to weaken last week with both ROOF ratios recovering some ground, ending just shy of the neutral zone.

Treasury yields see-saw, as Fed tries to ease inflation concerns; Euro falls over fears of third COVID wave; Portfolio risk ebbs on lower equity volatility

Most equity markets have soared since the 2020 downturn; Equity risk still above pre-pandemic levels; Post-vaccine rotation reflected in both sector and style performance.

US markets reached new record highs last week, but sentiment remains risk-averse. European markets seem to anticipate a stimulus-induced rebound in sentiment. Global and Asia ex-Japan investor sentiment recovers slightly to end week in neutral.

Treasury curve continues to steepen, as Fed ups economic outlook; US yields outstrip Bunds amid widening growth forecasts; Portfolio risk declines, as equities and FX rates decouple once more.