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The best defense is a good risk off-ense

07 November 2018

Research Signals - October 2018

The month of October has witnessed some of the worst stock market corrections in history and this year saw it live up to this tendency toward volatility. As such, volatility-based metrics were successful signals in general, as demonstrated by positive performance from low beta in each of our developed market coverage universes (Table 1). Market participants will now wait to see if confidence can be restored from concerns of rising interest rates, trade wars and contracting growth outside the US, as confirmed by the slowdown in the J.P.Morgan Global Manufacturing PMI to a near two-year low.

  • US: 60-Month Beta posted a significant double-digit spread performance among large caps, a level not seen since January 2016
  • Developed Europe: Industry Relative TTM Dividend Yield sat alongside 60-Month Beta as positive indicators for the month
  • Developed Pacific: 24-Month Value at Risk was a significant signal, especially in markets outside Japan, while Reinvestment Rate was a negative indicator in Japan
  • Emerging markets: Large caps outperformed, as captured by Natural Logarithm of Market Capitalization, along with signals from the securities lending market such as Demand Supply Ratio and Implied Loan Rate

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