Axioma Insight Quarterly Risk Review

Read Axioma’s informed perspectives on the status of different potential risk sources around the globe.

  • Axioma Insight™ Quarterly Risk Review

    Q3 2016

    By the time the third quarter rolled around, markets were experiencing periods of both severe unrest and eerie calm. The initial shock of the Brexit vote sent equity market volatilities and correlations to new heights in July. But Brexit concerns faded rapidly. Asset correlations made a U-turn by the end of July and in most regions risk forecasts fell to their lowest levels since the summer of 2015 by quarter-end. The summer months were otherwise relatively calm, with trading activity slowing down greatly in August. Large swings in oil prices continued. 

  • Axioma Insight™ Quarterly Risk Review

    Q2 2016

    At the outset, and for most of the second quarter, it appeared risk was re-entering a relatively benign period. Many components of risk (market, country, currency, style) had fallen in aggregate (of course, not all individual countries, currencies or styles followed suit). But two relatively unexpected events served to shatter the calm – a sudden spike in oil prices, which seemed to have the biggest impact on Canada but was felt elsewhere as well, and, of course, the vote by citizens of the UK to leave the European Union.

    Executive Summary Edition

  • Axioma Insight™ Quarterly Risk Review

    Q1 2016

    Markets experienced sharp increases in risk during the first quarter, with most, if not all, components of risk contributing to the increase. Global market risk ended the quarter higher than it has been since 2012, although clearly well below the levels seen during recent crises, including the global financial crisis and the European debt crisis. Factor volatilities – country, currency, industry, style – all rose, some quite substantially, with some reaching the top quartile or higher of risk relative to historical levels. Correlations between factors were mixed, with some lower correlations serving to dampen the impact of higher volatility, at least slightly. Correlations across asset classes also saw a few large changes. Below we discuss all of these issues.

    Executive Summary Edition

  • Axioma Insight™ Quarterly Risk Review

    Q4 2015

    Although risk decreased significantly during the fourth quarter – a quarter dominated by macroeconomic events – the annual risk change was positive for 2015 in most major markets, due to the extreme levels of volatilities experienced in the third quarter. In the Executive Summary we discuss the issues that conspired to make 2015 an extraordinarily challenging year for portfolio managers, from a risk-management perspective. A full series of charts, tables, and notes provides an in-depth look at risk for the eight major regions.

    Executive Summary Edition
    US Edition
    European Edition
    Asia Pacific ex-Japan Edition
    Japan Edition
    China Edition
    Australia Edition
    Emerging Markets Edition
    Global Edition

  • Axioma Insight™ Quarterly Risk Review

    Q3 2015

    Melissa Brown
    Senior Director, Applied Research

    After a period of relative calm in the first few months of this year, volatility has once again raised its head. In this report we discuss the many sources of increased market volatility in the third quarter.

    In addition, we have provided charts and brief notes detailing risk in more detail for eight individual regions.

    Executive Summary Edition
    US Edition
    European Edition
    Asia Pacific ex-Japan Edition
    Japan Edition
    China Edition
    Australia Edition
    Emerging Markets Edition
    Developed Markets Edition

  • Axioma Insight™ Quarterly Risk Review

    Q2 2015

    Melissa Brown
    Senior Director, Applied Research

    Greece-ing the Skids

    Angst aplenty—driven by multiple themes—made for an unnerving second quarter. And risk estimates responded accordingly. Exempli gratia:

    • China’s market surge and subsequent plunge
    • Concerns about Greece’s debt crisis and its potential exit from the euro
    • Energy prices reversing course from their steep slide
    • A substantial increase in bond-market volatility

    These, of course, were not the only newsworthy events of the quarter, which also included several national elections, concerns about valuation levels of various markets and murmurings of a possible UK exit from the European Union. That said, the bullets above dominated the news and had the biggest impact on market volatility. Europe and Asia were strongly affected by Greece and China, respectively, and saw risk pop, despite accommodative central bank moves aimed a different result. In contrast, things took on a very different cast in the US and Canada, where better economic news, steadying oil prices and more-stable interest rates had a soothing impact on risk, which dropped much nearer to all-time lows than all-time highs. The US may have been benefited from the Fed’s decision to put off rate increases a little longer, in response to concerns about rising risk levels elsewhere in the world. 

    To our valued readers of the Axioma Quarterly Insight Report:
    Less, as they say, is sometimes more. With this issue of the Axioma Quarterly Insight Report, we have transitioned to a single comprehensive and concise review of risk characteristics across all equity markets. This new approach enables us to focus on the key highlights, headlines and takeaways for each quarter. That said, for those of you who wish to continue to delve into the charts and tables for any or all the various regions we cover, we are happy to provide them. Please contact your sales or client services representative, or mbrown@axioma.com.

  • Axioma Insight™ Quarterly Risk Review

    Q4 2014

    Melissa Brown
    Senior Director, Applied Research

    Mere Breezes? Or Winds of Change?

    2014 was a relatively quiet year—until the fourth quarter, that is. Oil prices tumbled sharply. Many currencies weakened substantially, most notably the ruble, which had its biggest drop since the Russian debt crisis in 1998. China cut rates. The ECB lowered growth and inflation forecasts. Japan’s recession appeared to be worse than many thought. And there was a “flash crash” in the US. Of course, not all the news was bad, but it certainly seemed that way...

    Quarterly Risk Review Executive Summary
    US Edition
    China Edition
    Australia Edition
    European Edition
    Asia Pacific ex-Japan Edition
    Emerging Markets Edition
    Global Developed Markets Edition
    Japan Edition

  • Axioma Insight™ Quarterly Risk Review

    Q3 2014

    Melissa Brown
    Senior Director, Applied Research

    Markets Wobbled, but Risk Remained Steady-As-She-Goes

    While markets wobbled in the third quarter, many risk forecasts–especially medium-horizon–continued the decline that started in late 2011. For US largecap stocks, the level of risk was lower than all but a handful of month-end values since the model’s inception in 1982. The Canadian market, as measured by the TSX Composite, remained the lowest risk of the major benchmarks we track, while Japan’s 4.2 percentage point decrease in mediumhorizon risk was by far the biggest. The broadest benchmarks saw medium-horizon risk fall by one percentage point during the quarter, while short-horizon forecasts rose a bit.

    Quarterly Risk Review Executive Summary
    US Edition
    China Edition
    Australia Edition
    European Edition
    Asia Pacific ex-Japan Edition
    Emerging Markets Edition
    Global Developed Markets Edition
    Japan Edition

  • Axioma Insight™ Quarterly Risk Review

    Q2 2014

    Melissa Brown
    Senior Director, Applied Research

    The Calm Before The...?

    • Investors Show Little Fear, The Wall Street Journal, May 23
    • It’s Easy to Forget About Risk in a Stable Market, The New York Times, June 2
    • Fed Officials Growing Wary of Market Complacency, The Wall Street Journal, June 3
    • Wall Street’s New Normal - Quiet, The Wall Street Journal, June 5
    • Wall Street’s ‘Fear Gauge’ Hits 7-year Low, Financial Times, June 8

    This report on the decrease in risk during the second quarter, and the extremely low levels of risk in many markets, is unlikely to surprise to anyone. The burning question is, what, if anything, does it portend?


    US Edition
    China Edition
    Australia Edition
    European Edition
    Asia Pacific ex-Japan Edition
    Emerging Markets Edition
    Global Developed Markets Edition
    Japan Edition

  • Axioma Insight™ Quarterly Risk Review

    Q1 2014

    Melissa Brown
    Senior Director, Applied Research

    What Was That?

    Call it a speed bump. After a strong 2013, most markets abruptly hit the brakes in January. Concerns over both the impact of Fed tapering and high valuations hit many markets hard, especially Japan, which had been a 2013 market leader. But the effect was short-lived. Investors looked past their immediate concerns to better corporate results in the US, and to Europe returning to a path of growth. Certain emerging markets – such as the so-called “fragile five” – also showed signs of recovering. These markets were hard hit by the initial tapering announcement late last spring, but fared quite well in the first quarter, as their governments worked to clean up some of the concerns about their local economies. Overall, markets settled down and made up the ground they lost in January—in many cases ending the quarter higher than where they started, although Japan continued to struggle throughout the quarter as a result of domestic issues. So as the quarter drew to a close, it appeared that investor anguish over central bank and regulatory actions – the major drivers of equity returns over the past few years – had faded. Even geo-political events, like the turmoil in the Ukraine, had little bearing outside of Ukraine and Russia – at least as far as the financial markets were concerned.

    US Edition
    China Edition
    Australia Edition
    European Edition
    Asia Pacific ex-Japan Edition
    Emerging Markets Edition
    Global Developed Markets Edition
    Japan Edition