Tag Archives: financial risk management

Milliman FRM Market Commentary: July 2018

Stocks hit the ground running to start the second half of 2018. In this month’s commentary, Milliman’s Joe Becker addresses the following:

• All three major segments of the global equity market pushed higher in July amidst cooling trade war rhetoric, rising global interest rates and reports of strong economic growth.
• With its fourth consecutive positive monthly return and its best since January, the S&P 500 increased its YTD return to 6.5%.
• Small-cap stocks continued their winning streak with their fifth consecutive month of positive returns, during which they’ve risen 14.5%.
• After touching a YTD low in late June, EM equities reversed course in July, benefiting from a reprieve in the US dollar’s ascent and climbing 2.5%, their first positive monthly return in six months.
• The relatively low equity market volatility in June extended into July as positive news outweighed the negative, pushing stock prices gradually higher.
• After declining in June, the correlation of the S&P 500 to global ex-US equities increased steadily higher during July, while its correlation to the U.S. aggregate bond market, after rising and falling remained largely unchanged.

To learn more, download the full commentary at MRIC.com.

Milliman FRM Market Commentary: June 2018

Global equity segments sharply diverged heading into second half. In this month’s commentary, Milliman’s Joe Becker addresses the following:

• The S&P 500 notched its third positive monthly return, locking in a solid Q2 gain of 3.4%. Relative to last year, however, its year-to-date (YTD) return of 2.6% is less than one-third of what it was through this time in 2017 (9.3%).
• Meanwhile, small cap stocks, deemed to have less exposure to the detrimental effects of trade wars, are up 9.4% YTD, their best first-half return of the last five years.
• The same cannot be said for emerging market stocks, which were down more than 7% in Q2 and are down nearly 15% from their all-time high in January. Among the worst performers have been China and Brazil, down 13% and 18% YTD, respectively, in USD terms.
• Notwithstanding back-and-forth trade war rhetoric, U.S. equity market volatility trended lower as the month wore on; June’s volatility was lower than May’s and was also below its five-year average.
• The correlation of the S&P 500 to global ex-U.S. equities declined during the month while its correlation to the U.S. aggregate bond market remained largely unchanged.

To learn more, download the full commentary at MRIC.com.

Milliman FRM Market Commentary: April 2018

Stocks settle in as interest rate questions loom. In this month’s commentary, Milliman’s Joe Becker addresses the following:

• After two consecutive months of market tumult (comparatively speaking) and negative returns, the S&P 500 in April exhibited greater calm and eked out a positive return.
• Volatility was lower in April than it was in March and closer to its five-year average across each of the major segments of the global equity market.
• Unlike 2017, markets in post-January 2018 have been much less decisive. On the one hand, strong global economic growth and pro-growth tax cuts are reasons for optimism. On the other, trade-tariff wars and rising interest rates are undermining investor confidence about potential future earnings growth.
• The U.S. dollar broke upward out of its three-month range, creating a headwind and potentially higher volatility for non-U.S. equities.
• Correlations between major equity market segments were little changed in April. The correlation between U.S. stocks and bonds, however, edged higher as rising interest rates and widening credit spreads weighed on bond market returns.

To learn more, download the full commentary at MRIC.com.

Milliman FRM Market Commentary: March 2018

March validated February’s initiation of a new, higher volatility regime. In this month’s commentary, Milliman’s Joe Becker addresses the following:

• March capped off the S&P 500’s first negative quarterly return since Q3 2015 and the first negative Q1 since 2009.
• After not experiencing a single daily move of more than 2% through all of 2017, the S&P 500 has now seen six such moves through February and March.
• If “taper tantrum” was a fitting moniker for the 2013 reaction to the prospect of ending the U.S. Federal Reserve’s quantitative easing (QE), the volatility in early 2018 might well be referred to as the “tightening, tech, trade-tariff tantrum,” as markets reacted to tighter monetary policy, a data breach at Facebook, and the prospect of a tariff-induced trade war.
• While not as high as it was in February, volatility in March was still above its five-year average and much higher than it was in 2017.
• Falling interest rates boosted the U.S. aggregate bond market, reducing its correlation to equities and improving it as a diversifier, while the correlation between U.S. and foreign equities increased.

To learn more, download the full commentary at MRIC.com.

Milliman FRM Market Commentary: February 2018

Volatility awakened in February after a two-year hibernation. In this month’s commentary, Milliman’s Joe Becker addresses the following:

• After 15 consecutive months of positive returns, the global equity market posted its first negative monthly return since October 2016 and its highest monthly volatility since June 2016.
• Up more than 7% year-to-date into late January, the global equity market quickly changed direction and sold off more than 9% in less than two weeks.
• February saw 12 daily moves in the S&P 500 of at least 1%, already 50% more than 2017’s total of eight. In addition to higher realized volatility, the VIX spiked to its highest level since August 2015.
• The start of February’s downturn coincided with two economic data surprises. Larger-than-expected growth in both payrolls and average hourly earnings triggered fears that the Federal Reserve would begin to tighten policy at a faster rate than previously expected.
• As is often the case in times of market stress, February’s downturn saw correlations across market segments and asset classes push higher.

To learn more, download the full commentary at MRIC.com.

Milliman FRM Market Commentary: January 2018

Without missing a beat, global equities continued their rally into 2018. In this month’s commentary, Milliman’s Joe Becker, Adam Schenck, and Jeff Greco address the following:

• After rising 1.5% in December and finishing the year 24% higher, the global equity market roared out of the gate in January, climbing 5.5% and notching its best start to a new year since 1994.
• Emerging market equities led the way, rising nearly 10% before finishing the month up 8.2%. That brings its 12-month return to 41.3%, its best since April 2010.
• With the exception of emerging market equities, volatility edged slightly higher around the globe in January, but remained in a historically low range. The VIX reached its highest level since August.
• In the United States, consumer discretionary stocks led all sectors, rising 9.2% on the month, while interest-rate-sensitive utilities lagged as the majority of the yield curve pushed sharply higher.
• The Federal Reserve left its interest rate unchanged at its January 31 meeting, but noted that, “Inflation on a 12-month basis is expected to move up this year and to stabilize around the committee’s 2 percent objective over the medium term.”

To learn more, download the full commentary at MRIC.com.