In this monthly report we provide data to assist in assessing risk in an equity portfolio. Substantial changes to market valuations often occur as investors adjust portfolios for new data, particularly where it differs from the ‘consensus’ view.
The market pricing of ‘risk’ is dependent on:
- Volatility
- Share price levels
Key economic indicators we consider are:
- Global macro conditions (in pictures)
- Key upcoming data releases, with market pricing of outcomes (where available)
- Interest rates
- GDP announcements
- Inflation announcements
- Geopolitical developments
Our overall assessment, which is shared by many other commentators, is that in this macro environment, both ‘income’ and ‘growth’ asset classes have fragilities.
With this view, there is a need to expand the range of ‘income’ and ‘growth’ assets to include risk managed equity funds. Such funds trade off some of the upside to insure against downside risk. It is possible to manage the risk profile of such funds by varying the underlying assets and the risk-return parameters.
