Equity Risk Monitors — April 26, 2021

Equity Risk Monitor Highlights | Week Ended April 22, 2021

  • US Value stalls after spectacular Q1 performance
  • Global equity trading volumes tank
  • US dollar weakens against developed currencies

US Value stalls after spectacular Q1 performance

After one of its best quarters in almost 40 years, US value stalled in April. The Value style factor was down slightly last week, and its four-week return was close to zero as of Thursday, as measured by Axioma’s US medium-horizon fundamental model. In contrast, Value’s return in the first quarter of 2021 was more than two standard deviations above its long-term average, resulting in the fourth-best quarterly return since 1981. For more details on Value’s long-term performance, see blogpost After years of dateless Saturday nights, Value finally goes to the prom. But will it become Prom King?.

See graph from the US Equity Risk Monitor as of 22 April 2021:

Global equity trading volumes tank

Despite the upswing in major indices around the globe this past month, trading activity in April dropped steeply, suggesting more recent market gains have been made on lower volume. After the average daily trading volume for stocks in the STOXX Global 1800 index hit a 12-month high of about $400 billion at March end, trading activity slid to $320 billion last week. Investors appear concerned about the sustainability of the market’s current strength, but it is worth noting that volume remains relatively high compared with historical levels. Recent trading activity in Info Tech, Industrials, Real Estate and Health Care has been below their 12-month volume averages. Info Tech and Health Care are the largest and second-largest sectors in the global index, respectively, and therefore most likely accounted for a large share of the decline in volumes. Trading volumes for the other sectors in the STOXX Global 1800 index were either near or slightly higher than their 12-month averages.

See graphs from the Global Developed Markets Equity Risk Monitor as of 22 April 2021:

US dollar weakens against developed currencies

The US dollar fell against major currencies in April, with most developed currencies recording strong positive yearly returns against the greenback. The Norwegian krone stood out with a 12-month return close to 30%, while the New Zealand dollar and Swedish krona recorded the second- and third-best returns, respectively, at around 20%. In contrast, the Japanese yen was the only major developed currency with a one-year return against the greenback of close to zero. Most currencies were positioned at or near the high ends of their one-year return ranges against the US dollar.

While the Norwegian krone was the best performer over the past year, it was also the riskiest developed currency. The biggest loser—the yen—was the second least risky after the Singapore dollar as of last Thursday. All major developed currencies were positioned near the low ends of their volatility ranges against the greenback, as measured by the Axioma Worldwide short-horizon fundamental model.

See graph from the Global Developed Markets Equity Risk Monitor as of 22 April 2021:

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