Equity Risk Monitors — September 13, 2022

Equity Risk Monitor Highlights | Week Ended September 9, 2022

  • Most markets remain below the red line so far in 2022
  • Defensive sectors prevail
  • Global trading volume nears 3-year low

Most markets remain below the red line so far in 2022

Stocks rebounded somewhat last week, but most markets still recorded negative year-to-date returns as of last Friday. Global equity markets marched up in June and July, but have dropped abruptly for three straight weeks since mid-August, driven by expectations for tighter central banks’ policies and the energy crisis in Europe. Major central banks, such as the Fed, the Bank of England, and the European Central Bank, remained committed to taming inflation, even if these policies may push their economies into recession.

Most markets recorded positive returns in the third quarter, with the STOXX® USA 900 Index posting a 9% quarter-to-date gain. In contrast, the STOXX® China A 900 Index was the only benchmark closely tracked by Qontigo’s Equity Risk Monitors to see a negative quarter-to-date return. Interestingly, for most of this year, Developed Markets ex-USA outperformed the global market, but currently, the STOXX® Global 1800 ex-USA Index is the biggest loser, its year-to-date return dipping lower than -17%.

See graph from the Developed Markets ex-US Equity Risk Monitor as of 9 September 2022:

Defensive sectors prevail

As the global economic growth slowed down, defensive sectors such as Consumer Staples, Health Care, Utilities and Energy, have been outperforming the STOXX® Global 1800 Index. However, only Energy and Utilities recorded positive returns over the past 12 months, with Energy posting a 12-month gain greater than 40%, in spite of the recent decline in oil prices.

In contrast, cyclical sectors. such as Communication Services, Consumer Discretionary, and Information Technology, underperformed the global benchmark and were the largest detractors from the Global index’s 12-month return.

See graphs from the Global Developed Markets Equity Risk Monitor of 9 September 2022:

Global trading volume nears 3-year low

Trading volume dropped to a level not seen since February 2020—right before the market collapsed as the pandemic started. A seasonal decline in trading activity during the summer months is to be expected but this current level of trading activity seems to be more than just the typical summer slump and may indicate investors’ reluctance to trade amid market uncertainty and increased geopolitical risk. Alternatively, it may be an indication of a reversion to pre-COVID long-term average levels.

Trading activity typically intensifies in September, but so far, volumes remained lower than we had seen around the same time last year or two years ago. All sectors in the STOXX Global 1800 index saw declines in trading volume, except for Energy. Information Technology and Consumer Discretionary saw the largest decline in volumes, as compared to their one-year averages.

The chart below does not appear in our Equity Risk Monitors, but can be provided upon request:

See graph from the Global Developed Markets Equity Risk Monitor as of 9 September 2022:

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