Equity Risk Monitors — April 24, 2022

Equity Risk Monitor Highlights | Week Ended 21 April, 2022

  • Market risk drives the decline in global risk
  • European stocks continue to rise
  • Trading activity slides

Market risk drives the decline in global risk

Market risk drove the recent decline in global risk, even as the STOXX® Global 1800 Index level has fallen. The medium-horizon risk forecast for the Global index dropped 60 basis points in April, bringing the global index risk down to 17%, as measured by Axioma’s Worldwide medium-horizon fundamental model. At the same time, the STOXX® Global 1800 Index fell nearly 4% in April.

A look at the major components of risk shows that, while Market risk was the main driver of the risk decrease this month, Country and Stock Specific risks—which represent a smaller part of total benchmark risk, also contributed to the decline. In contrast, Style, Currency and Industry risks have all increased since the end of March. Style risk saw the largest increase over this period, with half of the style factors in the Worldwide model now positioned at or near the high ends of their one-year volatility ranges.

See graph from the Global Developed Markets Equity Risk Monitor as of 21 April 2022:

European stocks continue to rise

The European market continued to follow the upward trend started in the beginning of March, but last week’s gain was driven by different sectors. The STOXX® Europe 600 Index has risen 1% over the past five business days. The weekly gain remained within the one standard deviation of the expectation at the beginning of the week, as measured by Axioma’s Europe short-horizon fundamental model.

Last week’s gain was driven by Industrials and Information Technology, while Heath Care was the main detractor. This is in stark contrast to prior weeks when Health Care was the main driver of the European market’s rebound after the Russia-Ukraine war started. So far in 2022, Europe has outperformed all other regions covered by Qontigo’s Equity Risk Monitors, except for the UK and Canada—which are the only two regions to see year-to-date gains.

See graph from the Europe Equity Risk Monitor  as of 21 April 2022:

Trading activity slides worldwide

After a striking jump in February, trading volumes have fallen sharply particularly in the past four weeks, amid swings in oil prices, a mixed bag of earnings reports, a prolonged war in Ukraine, and the Fed’s statements about a tighter monetary policy.

Average daily trading volume for the stocks in the STOXX® Global 1800 Index dipped below $360 billion last week—a 20% drop from the February high. Current trading volumes for most sectors in the STOXX® Global 1800 Index were either near or below their 12-month averages, except that of Energy and Materials, which were slightly higher than their respective averages.

See graphs from the Global Developed Markets Equity Risk Monitor as of 21 April 2022:

For more insights and research from the Applied Research team, please click here.