April 16, 2018 01:00 AM
Riskwatch for Q1 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 March 30, 2018. Change compares to the previous quarter.
U.S. market volatility*
Predicted volatility by currency**
Predicted volatility by country**
FAANG stocks have become a larger portion of Russell 1000 risk
Capitalization weight of the FAANG stocks — Facebook Inc., Apple Inc., Amazon.com Inc., Netflix Inc. and Google (Alphabet Inc.) — in the Russell 1000 vs. how much they contribute to the overall volatility of the index.
|U.S. 10-year T-note (yield)||2.74%||33 bps||51.67%||-0.02%|
|U.S. inv.-grade (spread)||63 bps||9 bps||23.15%||-0.02%|
|U.S. high-yield (spread)||285 bps||18 bps||50.79%||-0.02%|
|European gov't 10-year (yield)||0.52%||4 bps||44.67%||-0.04%|
|European inv.-grade (spread)||54 bps||-3 bps||29.40%||-0.07%|
|European high-yield (spread)||206 bps||11 bps||76.67%||-0.08%|
|Russell 1000||Russell 2000||FTSE||Euro||Pound||Yen|
|U.S. 10-year T-note (yield)||1.00||-0.29||-0.60||0.67||-0.25||-0.11||0.25||0.33||0.22||-0.11||-0.01||-0.43|
|U.S. inv.-grade (spread)||-0.29||1.00||0.50||-0.14||0.18||0.20||-0.12||-0.12||-0.12||-0.06||-0.13||0.11|
|U.S. high-yield (spread)||-0.60||0.50||1.00||-0.43||0.20||0.25||-0.40||-0.39||-0.50||0.01||-0.11||0.36|
|European gov't 10-year (yield)||0.67||-0.14||-0.43||1.00||-0.40||-0.20||0.11||0.19||0.12||0.09||0.07||-0.39|
|European inv.-grade (spread)||-0.25||0.18||0.20||-0.40||1.00||0.44||-0.13||-0.14||-0.10||-0.12||0.01||0.19|
|European high-yield (spread)||-0.11||0.20||0.25||-0.20||0.44||1.00||-0.09||-0.07||-0.14||-0.03||-0.07||0.16|
U.S. and euro spread curves are defined as the spread over the swap curve (previously spread over the government 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.