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MAC Monitor — October 9, 2023

Multi-Asset Class Risk Monitor Highlights | Week Ended October 6, 2023

  • Treasury curve inversion lessens after stronger-than-expected jobs growth
  • Strong oil price fluctuations raise portfolio risk

Treasury curve inversion lessens after stronger-than-expected jobs growth

The term spread between long and short-dated US Treasury yields climbed to its least negative level in almost a year in the week ending October 6, 2023, following reports of stronger-than-expected jobs growth. The Bureau of Labor Statistics reported on Friday that the American economy created 336,000 new positions in the non-farm sector in September, eclipsing analyst predictions of 170,000. Another 40,000 were retroactively added to August’s number, taking the revised total for that month to 227,000. In response, the 10-year borrowing rate soared to just under 4.8%—its highest level in more than 16 years—while the 2-year rate remained anchored around 5.1%, thus reducing the differential between the two curve points to 30 basis points.

Please refer to Figure 3 of the current Multi-Asset Class Risk Monitor (dated October 6, 2023) for further details.

Strong oil price fluctuations raise portfolio risk

A strong fluctuation in oil prices raised the predicted short-term risk of Qontigo’s global multi-asset class model portfolio by 0.6% to 8.6% as of Friday, October 6, 2023. Concerns over the potential adverse effect of higher borrowing costs on economic growth caused the biggest daily drop in crude prices in more than a year on Wednesday, more than offsetting the previous week’s surge on the back of supply cuts from Saudi Arabia and Russia. Oil’s percentage risk contribution soared from -0.5% to +2.4% as a result. Developed non-US equities also saw their share of overall portfolio risk expand from 23.7% to 25.4%, due to a strong co-movement of local stock-market returns and exchange rates against the US dollar.

Please refer to Figures 7-10 of the current Multi-Asset Class Risk Monitor (dated October 6, 2023) for further details.