Is Momentum’s sharp reversal an indication of changes in investor sentiment and a turning point for markets?

In this post, we investigate whether Axioma’s ROOF scores give any credence to the old adage, “When Wall Street sneezes, all markets catch a cold.”

We use the Axioma ROOF Scores to quantify investors’ expectations of the new PM in the run-up to his nomination, and the report card they have given him since.

We have added two other factors to the new model that reflect the unique composition of the Canadian economy: residual gold sensitivity and residual oil sensitivity.

While Version 4 of our Canada model also showed some big differences between Canada and other markets, Canada stood out most in terms of factor volatility.

A client recently asked an intriguing question: “Do style factors behave differently after a yield-curve inversion?” One might think they would, but that turned out not to be the case. 

The US market fell 3% overnight and the implied volatility from the VIX shot up to 22%. We use ROOF™ Scores to attempt to see how this could have happened.

Over the last five years, the style factor returns in Axioma’s Asia ex-Japan fundamental model for Profitability really stand out.