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*
Predicted volatility by currency**
Predicted volatility by country***
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.
|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%|
|Russell 1000||Russell 2000||FTSE||Euro||Pound||Yen|
|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|
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.