- November Rebound
- “Up and to the Right” vs “Down and To the Right”
- Not Enough Winners
The following two charts are not published with Equity Risk Monitors but are available upon request.
The last 10 trading days to Friday 10 November have seen a sharp reversal from the previous 4 weeks in most of the major markets we track:
From October 27 to November 10, all indices gained, with the STOXX® US Index is up 7.5%, Japan up 4% and Europe 3.3%:
“Up and to the Right” vs “Down and to the Right”
While rising market levels are generally not associated with increasing volatility, we have in fact seen, as we pointed out last week, risk levels rising even as markets rise. Over the last week, risk forecasts in most of our models did decline slightly, but the trend has certainly been higher over the past month.
STOXX US – “Risk Watch”
STOXX Japan – “Risk Watch”
STOXX Europe 600 – “Risk Watch”
STOXX International Developed Markets – “Risk Watch”
STOXX UK – “Risk Watch”
See Chart 11, “Risk Watch” Various Equity Risk Models November 10, 2023
As the charts above show, the US and Japan show arrows going up and to the right, while the others show the more “traditional” relationship where the arrows point down and to the right.
Return dispersion is back up
The following chart is not published with Equity Risk Monitors but is available upon request.
While the reversal in index returns over the last 2 weeks is stunning, particularly in the US, the narrowness of those gains is alarming. Using the data we normally present in Chart 24 of the Risk Monitors, “Weekly Asset Return Proportion Ahead of Index”- we compared the trailing 2-weeks of the proportion of assets beating their respective indices with the 2-week return of the overall market. The first item of note is the lack of breadth in the US compared to all the other markets- while the US had the highest return by far of the 6 markets depicted, it had the lowest percentage of stocks beating the index- an average of 39%. The US was up 7.5%, but the percentage beating the index was 46.8 and 30.6 percent in those two weeks. Japan was similar over the last two weeks, but not quite as narrow:
In contrast, Europe was up 3.3% and the breadth was very reasonable with 57% beating the index over the 2-week period. The Emerging Markets index was somewhat narrow in the week ending November 3rd but well over 50% last week.