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

    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

    Q1 2015

    Melissa Brown
    Senior Director, Applied Research

    Risk—Unexpectedly—Eases in the First Quarter... Despite a Plethora of Concerns 

    Many markets ended 2014 with more of a bang than a whimper. Oil prices fell sharply. The dollar strengthened substantially versus most currencies. The European Central Bank lowered growth forecasts and raised the specter of inflation. Japan appeared to slide into recession despite its continued pursuit of an aggressive economic program. Markets swooned and risk jumped. The increase in risk was broad-based, too, with most countries, currencies, industries and style factors participating in the increase...

    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

    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

    Q4 2013

    Melissa Brown
    Senior Director, Applied Research

    2013 Year in Review

    As Frank Sinatra once crooned, it was a very good year...

    Most markets posted substantial returns in 2013, with the US and Japan the strongest of the strong. In fact, Japan had the highest return of the markets we track, gaining more than 45%. Despite (or perhaps because of) looming action by the US Fed to taper off its bond-buying, US markets surged in the fourth quarter, with the most economically sensitive sectors leading the way. The market, it appears, views the Fed action as an indication that the US economy is on the upswing. Returns in developed markets were substantially higher than those in emerging markets. The FTSE Developed Index gained almost 25%, whereas the FTSE Emerging Index was up less than 5%, with most of the difference occurring in the first half of the year.

    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 2013

    Melissa Brown
    Senior Director, Applied Research

    Scott Hamilton
    Director, Applied Research

    Tales of the Taper

    It was back in 2011 that James Bullard, President and CEO of the Federal Reserve Bank of St.Louis, was perhaps first to use the term “taper” in referring to a gradual reduction of quantitative easing. In May of 2013, it was Federal Reserve Chairman Ben Bernanke who spoke of “tapering”, and the word has never been the same since. The term, once used mainly in the context of candles and trouser legs, weighed most heavily on investors’ minds this quarter, as global markets continued to react to even the slightest mutterings of the US Federal Reserve. Yet, while the start of the quarter saw markets fearful of an imminent reduction in quantitative easing, by September the risk trade was back on and most markets around the world had happily recovered ground lost in June (and then some).

    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 2013

    Melissa Brown
    Senior Director, Applied Research

    Scott Hamilton
    Director, Applied Research

    Uneasy Riders

    Murmurs by the US Federal Reserve of a possible end to quantitative easing in 2014. A possible retreat from “Abenomics” stimulus in Japan. Actions by China to rein in its shadow banking system. The net result was an increase in volatility in the second quarter, though levels remained relatively low compared with recent historical peaks. The effects were strongest in China and Japan, though most of Asia and Australia, too, reacted negatively. Only a year ago it was Europe that was the focal point of global concerns. Those concerns may now be shifting to the East.

    While we have observed historically low levels of volatility in all the major markets for much of this year, many of the underlying macro issues that were key drivers of market volatility in recent years have hardly vanished. We have been reminded of this over the last month as volatility again began to climb, driven predominantly by macro and, more specifically, “government policy” news. The impact of the revived concerns was bigger from the perspective of our short-horizon models, where risk for major indices increased between 3% (for FTSE North America, in USD) and 11.3% (for FTSE Japan, in JPY) from the end of the first quarter of 2013 to the end of the second quarter.

    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 2013

    Melissa Brown
    Senior Director, Applied Research

    Scott Hamilton
    Director, Applied Research

    What, Me Worry?

    The US “sequestration.” Panic in Cyprus. Weak job growth in both Europe and the US. None of it seemed to have much of an impact on risk in the first quarter. Markets were generally strong and predicted risk largely continued the decline that started a year ago. For instance: short-horizon volatility forecasts for largeand small-cap US stocks and for the FTSE North America index fell more than two percentage points, while several benchmarks in Europe saw similar-magnitude declines at the medium horizon. Inevitably, of course, some refused to get with the program.

    Forecasts for China, Japan and Australia bucked the trend, as risk increased during the quarter, especially at the short horizon. China’s forecast risk (in USD for the CSI 300) now exceeds that of the Euro-Crisis countries (in EUR), and FTSE Japan (in JPY) is now one of the riskiest benchmarks we cover; a year ago it was one of the least risky.

    All of the benchmarks we track had far lower risk forecasts at the end of the first quarter of 2013 than they did at the end of the same quarter in 2012, with the exception of Japan, where short-horizon risk ended 1Q 2013 more than six percentage points higher than a year earlier.

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