This weekly blog, Factor Spotlight, looks to bring issues to our readership that help to give them an edge – whether it is through fresh insights in the market or new ways to use our Omega Point tool to analyze and manage their portfolios. ![]() Cumulative Return: Geopolitical Risk Factor (1/1/20 - 2/27/20) ![]() If we line these charts up with the worldwide results in Google Trends for “coronavirus,” we see a similar trajectory to the performance of the Geopolitical Risk factor during this time. Looking at the cumulative chart for Geopolitical Risk, we see that return peaked and came down on 2/19, and then popped back up on 2/26 when the second US case was announced. ![]() Clearly, this factor has been moving strongly against trend and is now Extremely Overbought, starting at -2.46 standard deviations below the mean at the beginning of the year, and now sitting at +2.32 SD above the mean. If the trend continues it will eventually normalize, but this does indeed highlight how companies that are positively exposed to coronavirus are seeing big tailwinds vs. names that are negatively impacted. |
US & Global Market Summary
|
US Market: 2/21/20 - 2/27/20![]()
Factor Update: Axioma US Equity Risk Model (AX-US4) ![]()
![]()
It is important to note that all of the factors shown above are built to capture security returns in excess of the market, and given the strong downward move in the market over the past week, most of the return can be explained by a general selloff in equities as shown below. Thus, last week’s move was not a factor rotation, similar to what we saw back in September, but a more traditional risk-off style selloff. If global growth does materially slowdown with a longer lasting impact on consumer behavior, we would expect to see more material movements factors such as Growth, Value, Volatility, and Market Sensitivity. Please let us know if you’d like to discuss the Geopolitical Factor in more detail or if you’re interested in adding the Wolfe factor library to your investment toolkit. Regards,Omer |

Flash Update: Coronavirus & its Impact on Geopolitical Risk
Omer CedarCategories
Latest Posts
- Factors Take the Stage Driven by Beta and China
- Alpha Surges Back to the Forefront
-
Beta Sparks a Strong Week in the US Market
Beta, 2022, Surprise Characteristics Indices, Extreme Movers
-
All Eyes on Rates & Inflation Amid Rising Recession Concerns
Interest Rates, Inflation, 2022, Surprise Characteristics Indices, Extreme Movers, CPI
-
Macro Drivers Tumble as Market Starts to Rally
Interest Rates, Macro, 2022, Surprise Characteristics Indices, Extreme Movers, CPI