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Welcome. This website is intended solely for the use of institutional investors, consultants and other professionally recognized financial intermediaries in specific countries. Intech Investment Management LLC (“Intech”), is an investment adviser registered with the United States Securities & Exchange Commission. Intech is not permitted to offer products and services in all countries. It is the responsibility of prospective investors to inform themselves of and to observe all applicable laws and regulations of any relevant jurisdictions, including the legal requirements and tax consequences within the countries of their citizenship, residence, domicile and place of business with respect to the acquisition, holding or disposal of shares or securities, and any foreign exchange restrictions that may be relevant thereto. The products and services referred to in this website are not offered to any person or entity in any jurisdiction where the advertisement, offer or sale of such products and services is restricted or prohibited by law or regulation or where we would be subject to any registration or licensing requirement not currently held by Intech or our affiliates. If Intech does not offer a website for your country, please visit www.janushenderson.com.

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Last year was one to remember.

The U.S. equity markets opened – and closed – 2018 with a sharp rise in volatility that pushed the S&P 500 Index into correction territory three times and came close to dropping by 20% on Christmas Eve.

A year ago we launched the Intech Equity Market Stress Monitor™, a collection of five risk metrics that measure the deviation from normal levels, any extreme is typically taken as a sign and warning that a return to the norm may shock the market and be a source of volatility. As traditional measures of volatility were demonstrating historical low levels, our risk indicators were showing extreme readings and a clear sign of strain in the market to come.
 

Sure enough, in 2018 all three major U.S. indexes, the S&P 500, Dow Jones Industrial Average and the Nasdaq Composite, closed negative for the first time since 2008, while the S&P 500 hit its worst December since 1931. The number of daily return swings greater than 1% grew to 64 in 2018 from 8 in 2017 as measured on the S&P 500 Index.

Last year the Intech Equity Market Stress Monitor™ shed light on two indicators in particular: capital concentration and skewness of returns.

While capital concentration increased over the first three quarters in the U.S. driven by a few larger-cap growth stocks, it decreased in other developed markets. In fact, we’ve never observed this level of divergence in capital concentration based on data going back to 1992, as explained in our Equity Market Observations video by Senior Managing Director, Richard Yasenchak.   

Skewness of returns, an indirect measure of investors’ confidence and exuberance levels, also showed a clear divergence in trend between the U.S. and rest of the world in 2018. The U.S. market exhibited a notable shift from extreme high levels to median levels towards the end of the year indicating that returns in the U.S. were showing a more balanced distribution and investors weren’t overly-optimistic.

On the other hand, we saw an increase in the skewness of returns in the non-U.S. developed markets as measured on the MSCI EAFE Index. This difference in trends reflects an uncommon divergence in market sentiment.

As we start 2019, the risk metrics tracked by the Intech Equity Market Stress Monitor™ continue to exhibit signs of stress across many equity markets, albeit less extreme than a year ago in U.S. and global equity market indexes. Yet, the greatest stress is currently observed in European and Emerging Markets equity indexes.

Intech has been studying the market stability for decades. Rather than rely solely on backward-facing measures, such as standard deviation, investors can monitor market stability, or lack thereof, by noting where an index’s risk sits relative to its historic ranges. Any extreme across a collection of risk metrics and indexes should be taken as a sign of warning that a return to the norm may shock the market and be a source of volatility.

Watch our latest Equity Market Observations video A quick take on the equity markets from the Intech perspective. Watch Now

 

The views presented are for general informational purposes only and are not intended as investment advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation, or sponsorship of any company, security, advisory service, or fund. Nor do they purport to address the financial objectives or specific investment needs of any individual reader, investor, or organization. The views are subject to change at any time based upon market or other conditions, are current as of the date indicated, and may be superseded by subsequent market events or other conditions.

The information, analyses and/or opinions expressed are for general information only, and are not intended to provide any specific financial, economic, tax, legal, investment advice, or recommendations for any investor. It should not be relied on as the sole basis for investment decisions. While every attempt is made to ensure that all information is accurate, there is no representation or warranty, express or implied, as to the accuracy and completeness of the statements or any information contained in this webcast. Any liability therefore (including in respect of direct, indirect, or consequential loss or damage) is expressly disclaimed.

Past performance is no guarantee of future results. Investing involves risk, including fluctuation in value, the possible loss of principal, and total loss of investment.

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