Riskwatch for Q3 2020

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 are now using Qontigo's WW4 (worldwide) model: predicted volatility by currency, predicted volatility by country and country-country correlations. Data are as of Sept. 30, 2020. Change compares to the previous quarter.

Stocks of the FAANG companies — Facebook, Apple, Amazon, Netflix and Alphabet (Google's parent) — have been a driving force in the rebound in the U.S. market following the early spring market plummet. After being remarkably similar in the second quarter in terms of risk, the technology darlings' risk characteristics and those of the U.S. market began to diverge. By the end of the third quarter, the FAANGs had become much riskier than the overall market.