INTERACTIVE

Riskwatch for Q3 2018

RiskWatch provides recent data on volatility and correlation, the two components of risk, for U.S. and global equity and fixed-income markets. The equity data are derived from Axioma's medium-term fundamental risk models. One set of tables is designed to capture U.S. market sectors plus countries and currencies with the highest and lowest levels of volatility and how that component of risk has changed since the end of the prior quarter. The highest and lowest correlated countries within developed and emerging markets are also highlighted. Another table illustrates how currency volatility can be a major driver of risk in multicountry benchmarks and can often change substantially from one quarter to the next. The fixed-income data, detailed in the multiasset-class section, consist of U.S. and eurozone government yields, investment-grade and subinvestment-grade spreads as well as correlations among those asset classes and selected currencies. Note that the following charts are now using Axioma's new WW4 (worldwide) model: predicted volatility by currency, predicted volatility by country and country-country correlations. Data are as of Sept. 28, 2018. Change compares to the previous quarter.
U.S. market volatility*
U.S. indexesCurrentChange
Russell 1000 9.73 -2.29
Russell 2000 10.25 -2.80
 
U.S. sectorsCurrentChange
Energy 19.14 -2.12
Telecommunication services 17.63 -0.80
Information technology 14.79 -1.82
Materials 13.06 -2.03
Financials 13.01 -1.92
Industrials 12.49 -2.22
Utilities 12.18 -2.77
Real estate 11.34 -2.42
Consumer discretionary 11.16 -2.02
Health care 11.08 -2.52
Consumer staples 10.32 -1.53
Index volatility
Predicted volatility by currency**
Developed markets
10 most volatileCurrentChange
Swedish krona 9.62 0.79
Norwegian krone 8.58 0.16
British pound 8.38 -0.04
New Zealand dollar 8.03 -0.08
Australian dollar 7.85 0.15
Euro 7.62 0.46
Danish krone 7.58 0.45
Swiss franc 6.89 0.15
Canadian dollar 6.76 -0.24
Japanese yen 6.71 -1.14
 
Emerging markets
10 most volatileCurrentChange
Turkish lira 23.62 9.04
South African rand 17.09 1.82
Brazilian real 13.66 1.64
Mexican peso 12.25 0.45
Russian ruble 12.07 1.56
Colombian peso 11.00 0.19
Chilean peso 10.74 1.27
Hungarian forint 9.62 0.54
Czech koruna 8.70 0.57
Romanian new leu 7.77 0.34
Predicted volatility by country***
Developed markets
5 most volatileCurrentChange
Japan 14.21 -0.22
Italy 13.34 -2.32
Poland 13.07 0.00
Portugal 12.86 -1.20
South Korea 11.90 0.09
 
5 least volatileCurrentChange
Canada 7.68 -1.45
Australia 8.25 -1.65
United States 9.25 -2.14
United Kingdom 9.40 -2.14
Norway 9.43 -1.74
Emerging markets
5 most volatileCurrentChange
Turkey 22.2 1.72
Egypt 22.08 3.14
Greece 20.29 -1.74
Brazil 18.45 -0.68
Qatar 17.5 -2.36
 
5 least volatileCurrentChange
Czech Republic 9.46 -1.29
Russian Federation 11.31 -1.28
Mexico 11.56 -1.58
Hungary 11.91 -1.85
Colombia 11.92 -1.36
Country-country correlations***
Developed markets
Highest correlationsCurrent
France Germany 0.79
France Netherlands 0.75
Germany Netherlands 0.71
France Belgium 0.70
Spain France 0.67
 
Lowest correlationsCurrent
U.S. Hong Kong -0.55
U.S. Singapore -0.53
U.S. France -0.49
U.S. Japan -0.48
U.S. Belgium -0.48
Emerging markets
Highest correlationsCurrent
Czech Republic Hungary 0.29
Poland Hungary 0.27
Mexico Colombia 0.27
Brazil Mexico 0.23
Czech Republic Colombia 0.21
 
Lowest correlationsCurrent
China India -0.37
China Mexico -0.33
India Taiwan -0.33
China Brazil -0.28
China South Africa -0.25
U.S. seesaws on stock risk
Before the 2016 election, the risk of U.S. stocks relative to their non-U.S. developed-market counterparts hit a 10-year low of 0.6, meaning U.S. stocks were about 60% as risky as non-U.S. securities. That ratio reversed sharply immediately after the election, and by April 2018 U.S. stock volatility was about 118% of non-U.S. stock, higher even than during the financial crisis. But since then, the ratio changed abruptly again and U.S. volatility plunged much more than that of other countries — suggesting that a much higher risk premium is currently being demanded for non-U.S. stock.
Multiasset-class data
Risk
LevelChangeStandard deviationChange
U.S. T-Note 10-year (yield) 3.04% 19.98 bps 0.51% -0.02%
U.S. inv-grade (spread) 57 bps -10.64 bps 0.20% 0.01%
U.S. high-yield (spread) 333 bps -12.27 bps 0.62% 0.09%
European gov't 10-year (yield) 0.49% 14.99 bps 0.44% -0.01%
European inv.-grade (spread) 60 bps -5.72 bps 0.24% -0.02%
European high-yield (spread) 248 bps -17.31 bps 0.66% -0.12%
Euro** 1.16 -0.52 7.62% 0.46%
British pound** 1.30 -1.23 8.38% -0.04%
Japanese yen** 113.58 2.55 6.71% -1.14%
Asset-class correlations
U.S.
10-year
T-note
U.S.
investment
grade
U.S.
high
yield
Euro
gov't
10-year
Euro
investment
grade
Euro
high
yield
Russell 1000Russell 2000FTSEEuroPoundYen
U.S. T-Note 10-year (yield) 1.00 -0.48 -0.55 0.71 -0.40 -0.37 0.24 0.26 0.25 0.05 0.09 -0.29
U.S. inv-grade (spread) -0.48 1.00 0.48 -0.29 0.13 0.20 -0.13 -0.11 -0.16 -0.03 -0.08 0.20
U.S. high-yield (spread) -0.55 0.48 1.00 -0.43 0.20 0.46 -0.36 -0.28 -0.53 -0.16 -0.19 0.24
European gov't 10-year (yield) 0.71 -0.29 -0.43 1.00 -0.50 -0.43 0.14 0.13 0.20 0.27 0.18 -0.26
European inv.-grade (spread) -0.40 0.13 0.20 -0.50 1.00 0.62 -0.17 -0.16 -0.13 -0.14 -0.04 0.19
European high-yield (spread) -0.37 0.20 0.46 -0.43 0.62 1.00 -0.22 -0.15 -0.32 -0.18 -0.10 0.24
Euro** 0.05 -0.03 -0.16 0.27 -0.14 -0.18 0.08 0.07 0.24 1.00 0.63 0.32
British pound** 0.09 -0.08 -0.19 0.18 -0.04 -0.10 0.02 0.02 0.20 0.63 1.00 0.19
Japanese yen** -0.29 0.20 0.24 -0.26 0.19 0.24 -0.11 -0.09 -0.09 0.32 0.19 1.00
U.S. and euro spread curves are defined as the spread over the swap curve. Emerging markets sections include only countries in the FTSE Emerging Markets index.
*US4 medium-horizon fundamental forecast.
**Numeraire: U.S. dollar.
***In excess of the global market.
Source: Axioma