Asset Risks Dashboard
Our surveillance risk scores across Equities, Interest Rates, Credit and FX aim to track market conditions and gauge risk sentiments.
Welcome to our macro risk dashboard page. In the interactive visualisations below, you can toggle across time series representations of risk assessment under each of four key asset classes. Full description of how the composite risk scores are calculated is provided below, along with a short commentary on the underlying drivers and developments.
Latest update: 16 September 2024
Equities
Risk score based on weighted average 5-year rolling Z-scores of the following indicators : S&P 500 Volatility (50%) and Valuation (50%).
The equities risk score remained benign after spiking temporarily in early August. Investors piled back into US equities in the remainder of August, but stocks are facing a tough start to early September. September tends to be a seasonally difficult month for US equities, with investors also watching for signs of a weakening economy. While the VIX is off its lows, it is not elevated. The risk score could be further biased upward should the US economy enter a recession and/or further unknown risks emerge.
Interest Rates
Risk score based on weighted average 5-year rolling Z-scores of the following indicators : 3M/10Y US Treasury yield spread (30%), 10Y US real yield (15%), 5Y5Y inflation swap (10%), 10Y US swaption volatility (15%) and 10Y Italy BTP - German Bund yield spread (30%).
The interest rate risk score remains benign, hovering near August's level, which edged up earlier in that month. The decline in the US real yield and inflation swap, along with the rise in US swaption volatility from its lows, reflect increased US growth worries. European sovereign spreads have been moving sideways.
Credit
Risk score based on weighted average 5-year rolling Z-scores of the following indicators : USD Libor-OIS spread (25%), US High Yield spread (25%), Europe High Yield spread (25%) and Emerging Markets Sovereign Credit spread (25%).
The credit risk score, while off its lows, has eased slightly and remains benign. US High Yield and European High Yield spreads have narrowed after spiking temporarily in early August. EM sovereign credit spreads have pulled back from their uptrend as EM economies benefit from an appreciation in their currencies against the US dollar. The risk score would be biased higher in the event that EM stress mounts and/or DM growth and financial stability risks intensify unexpectedly.
Foreign Exchange
Risk score based on weighted average 5-year rolling Z-scores of the following indicators : Broad US Dollar (70%), EUR-USD xccy basis swap Measure of USD funding premium/discount relative to EUR (15%) and JPY-USD xccy basis swap (15%).
The FX risk score has dropped from its high this year, driven by a weaker US dollar amidst expectations of US Fed rate cuts. Fed Chair Jerome Powell clearly telegraphed a rate cut in September when he announced at Jackson Hole that the time had come to adjust monetary policy. Meanwhile, US funding conditions remain comfortable across various funding markets. The risk score is biased higher in the event that USD funding conditions deteriorate or the US dollar unexpectedly strengthens aggressively.
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