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: 18 November 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 has decreased and remains benign, following the US presidential election, which resulted in Donald Trump’s victory as the incoming 47th US president, and a potential Republican Party sweep of Congress. US equities have reached new record highs while the VIX has declined, reflecting anticipation of favourable business policies, such as lower corporate taxes and deregulation, that are expected to sustain robust US economic growth. However, the risk score could edge up should the US economy unexpectedly enters 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 has fallen to its lowest level since mid-2022, declining from its August to early-September peak and remaining in benign territory. The downtrend reflects the US Fed’s ongoing interest rate cut cycle, which began in September, and expectations for further easing. The US Treasuries curve has steepened significantly, the US real yield has inched up, and US interest rate swaption volatility has moderated. European sovereign spreads have been well-behaved. The risk score would be biased higher should the Fed's rate cut trajectory reprice to the hawkish side amid a resilient US labour market and economy, and the implementation of Trump 2.0 policies.
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 remains benign and stable, after easing in September and October. Both US High Yield and Euro High Yield look well-behaved. EM sovereign credit spreads have shown resilience, continuing their decline from their uptrend observed between April – August 2024. 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 increased to its highest level since late-2023. The strengthening US dollar has been driven by the Trump trade. The anticipated positive economic growth and inflationary implications that would result from incoming US president Donald Trump’s policies (such as restricting illegal immigration, implementing new tariffs, lowering corporate taxes, and deregulation) could constrain the US Fed’s room to cut interest rates, therefore supporting the USD. Meanwhile, US funding conditions remain comfortable in the Euro market, but they have tightened in the Japanese market compared to earlier in 2024.
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