RiskWatch for Q1 2022

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 Qontigo'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 use the Axioma WW4 (worldwide) model: predicted volatility by currency, predicted volatility by country and country-country correlations. Data are as of March 31, 2022. Change compares with the previous quarter.

Taiwan and South Korea — the largest contributors to the STOXX Emerging Markets 1500 index risk at the beginning of 2022 — both saw their risk contributions decline during the first quarter. In contrast, most other countries’ risk contributions increased over this period. India, China and Brazil saw some of the largest increases in their contributions to benchmark risk. India remained the largest country in the STOXX Emerging Markets 1500 index and had the second highest contribution to benchmark risk (after Taiwan) by March 31, 2022. Russia’s contribution to the STOXX Emerging Markets 1500 index risk on March 17, 2022 (the day before its expulsion from the STOXX indexes) was at about the same level as seen at the start of the year (about 4%). This level of risk contribution was significant given that Russia’s weight in the emerging markets index had been halved from 4% on Dec. 31, 2021, to 2% on March 17, 2022.