Portfolio Risk Management

Despite ongoing central-bank claims that the current spike in inflation is “transitory,” the recent surge in oil prices to 7-year highs, combined with ongoing supply shortages across many industries, suggests otherwise.

US Treasury curve flattens, as strong earnings tame inflation fears—for now Higher short-term rates make pound more attractive Stocks and bond rise together—and so does portfolio risk US Treasury curve flattens, as strong earnings tame inflation fears—for now Short US Treasury yields rose while longer-dated maturities fell in the week ending October 15, 2021, as […]

US large caps up, as risk nears historical median China’s risk drops below that of US small caps Oil-sensitive currencies rise against the US dollar US large caps up, as risk nears historical median US large capitalization stocks rose last week, as their risk continued to climb towards the historical median. Despite the recent decline […]

Investor sentiment across global developed markets, the US, Europe and Japan weakened further last week, falling into or near the bearish zone (although Japan did recover somewhat in the last two days). In contrast, investor sentiment across global emerging markets, Asia ex-Japan and China strengthened further, rising to the upper region of the neutral zone.

The mood of investors in Q3 2021 was decidedly undecided—and increasingly skeptical. Questions about the strength of the economic recovery, persistent inflationary pressures, the world’s ability to overcome the pandemic, and the timing of any tapering efforts by major central banks kept sentiment on the negative side of the neutral zone.

Surging oil prices lift both inflation expectations and bond yields; Dovish ECB keeps the short end of the Bund curve anchored, as long yields rise; Risk appetites increase, but portfolio risk declines.

In Q3, risk rose slightly in the US, somewhat more in Emerging Markets, Japan and Australia, and substantially in China and Asia ex-Japan.

Market Sensitivity and Volatility decouple; Energy fuels benchmark risk; Trade volumes pick up.

Investor sentiment weakened further last week in all markets we track. The global decline in sentiment is weighing on markets and preventing a sustainable rebound from the corrections experienced in September.

Qontigo’s Olivier d’Assier comments on an Asian stock slip, led by Japan and Korea, as surging commodity prices fueled concerns about global inflation.

Persistent inflation and rate-rise fears keep pushing yields higher; Stagflation specter spooks sterling; Perfect storm of positive correlations boosts portfolio risk.

Investor sentiment has returned to the neutral zone, but continues to reflect an uneasy feeling about proclamations exhorting the post-pandemic’s positive impact on the economy while ignoring the continued spread of increasingly more virulent variants.