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Analytics | Portfolio Risk Management
Multi-Asset Class Risk Monitor Highlights | Week Ended January 26, 2024
Bund curve steepens over disinflation hopes; Persistent UK inflation puts question mark on early rate cuts; Lower FX and interest-rate volatility reduce portfolio risk.
Sentiment declined globally in the past two weeks as investors face an increasingly negative geopolitical world that really burns their toast. Sentiment had risen since November last year on the belief that both the Fed and the ECB would start to cut interest rates as early as this March. The mood reversal of the past two weeks indicates that most of them now acknowledge that this was less of theory and more of a guess. They have now set the May FOMC meeting as the absolute bar-is-closing, last call time limit for a rate cut. Global Developed ex-US investors have retained their bullish hopes, despite weak economic data out of Germany in the prior week. Their thinking seems to be that if the US can avoid a recession, so can the rest of the (developed) world, even though that is 100 percent not grounded in reality as most of the time in the past 20 years, the opposite was true.
The past week saw a complete reversal of the first week of 2024, with the US and other Developed markets up sharply. Within Developed Markets, the Medium-Term Momentum factor was particularly strong. Simultaneously, the Size factor, which had an exceptionally positive 2023 may have begun to reverse (Japan excepted, once again).
Analytics | Portfolio Risk Management
Multi-Asset Class Risk Monitor Highlights | Week Ended January 12, 2024
US Treasury yields drop despite inflation uptick; Lower FX and equity volatility reduces portfolio risk.
Investor sentiment softened slightly last week but remains mostly positive. Sentiment was bullish in five of the ten markets we follow (Asia ex-Japan, Global Developed Markets ex-US, Global Emerging Markets, the UK, and (briefly?), with the continued hope for a global (ex-Japan) pivot to a more dovish monetary policy, by major central banks. In contrast, sentiment among Chinese investors retreated from last week’s bullish feeling, returning to just positive this week, after further signs of deflation were met by a lack of stimulus response from the authorities, like an iPhone that’s (temporarily?) lost communication with its cloud.
Analytics | Portfolio Risk Management
Taming the Factor Zoo: Using Themes to decipher ETF strategies
In the beginning, there was only beta. Then in the 70s, the multi-factor concept was born. And investment managers (eventually) caught on to the fact that factors are particularly useful to explain persistent drivers of risk and return. But as time went on, the numbers of factors grew and grew and now, there are hundreds. Sometimes, you can have too much of a good thing.
US market down with Small Caps falling lower; Most US sectors declined with Info Tech taking the lead; Yen plunges following powerful earthquake.
Analytics | Portfolio Risk Management
Multi-Asset Class Risk Monitor Highlights | Week Ended January 5, 2024
Strong labor-market report dampens Fed pivot hopes; Euro traders continue to bet on ECB rate cuts despite inflation uptick; Positive correlations keep portfolio risk high and diversification limited.
Analytics | Portfolio Risk Management
What’s in store for 2024? 5 risks and opportunities to look out for
We have compiled a list of five considerations, derived from our proprietary risk analytics and models, along with other market intelligence, to help guide your 2024 views.
Investor sentiment held on to a mostly bullish feeling over the holiday period. Four (Asia ex-Japan, Global Developed Markets ex-US, Global Emerging Markets, and the UK) of the five markets that ended 2023 with a bullish sentiment, started 2024 feeling the same way. On Friday last week, they were joined by a fifth market, as Chinese investors (substituting for European investors, three weeks ago), raised their hopes for the fourth time in the last six months, for that all elusive economic stimulus package from the authorities.
This week’s edition of the Axioma Equity Risk Monitor covers the major trends in 2023 with links to many of our blog posts; for more details, please register for our Axioma Insight 2023 Risk Review webinar, taking place on 10 January.
Analytics | Portfolio Risk Management
Multi-Asset Class Risk Monitor Highlights | Week Ended December 15, 2023
Fed officials signaling rate cuts puts pressure on Treasury yields; Lower interest rates weigh on the dollar; Cross-asset rally raises correlations and portfolio risk.