- US Value continues to outperform
- Rise in stock correlations drives up Emerging Market risk
- China’s trading activity defies summer lull
US Value continues to outperform
Value style investing once again outperformed other style investing strategies in the US, as stock prices continued to climb last week on news of better-than-expected growth in the second quarter and ahead of comments from the Federal Reserve officials on Friday. While the style factor recorded negative returns at the three-month horizon, Value was up for the past week and month.
After rising in the first half of the year, Value returns dropped substantially in June and July, but not enough to offset prior gains. The uptick in Value over the past four weeks helped consolidate its position as the second-best performer, after Market Sensitivity, among all factors in Axioma’s US All Cap medium-horizon model.
See graph from the United States Equity Risk Monitor as of 26 August 2021:
Rise in stock correlations drives up Emerging Market risk
Rising asset correlations led the increase in Emerging Market risk over the past week and month. The STOXX Emerging Market 1500 index saw one of the largest increases in risk among all regions Axioma models track closely, with risk surging nearly 500 percentage points over the past five business days alone, as measured by Axioma’s Emerging Markets short-horizon fundamental model. Emerging Markets became the second riskiest geography after China. The decomposition of the change in risk from the standpoint of a full dense matrix revealed that the increase in correlations drove the jump in Emerging Markets risk last week and last month, with higher stock volatility providing an additional boost.
See graph from the Emerging Markets Equity Risk Monitor as of 26 August 2021:
China’s trading activity defies summer lull
Trading activity in China has surged, defying the cyclical summer lull typically seen globally. Trading volume for the STOXX China A 900 has steadily increased since May 2021, with the average daily trading volume hitting a near-term record of about US $100 bn this August. Trading volumes for all Chinese sectors in the STOXX China A 900 index, except Communication Services, were higher than their respective one-year averages last week. Materials stood out, with its current volume being double its 12-month average.
Despite the recent increases in major indices around the globe, trading activity still seems to be on a summer schedule for most of the world. Trading volume for stocks in the STOXX Global 1800 has dropped steeply since April 2021 and trading volumes for all sectors in the global index ended last week below their 12-month averages.
See graphs from the China Equity Risk Monitor as of 26 August 2021:
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