Analysts at Nordea Markets suggest that the recent rise in market risk comes as no surprise to them, as their multifactor analysis has indicated for some time that a normalisation of market volatility, at bare minimum, should be expected.
Key Quotes
“We have pinpointed two possible triggers, at least one of which – seasonality – has now activated a rise in market volatility. The second trigger – softer momentum in the business cycle – is still in play. We have identified three factors to overweight, including low-risk and high-quality traits. Expensive stocks tend to underperform in periods of market uncertainty, thus we also advocate for adding a valuation dimension. Additionally, our ESG research suggests that paying more attention to ESG can help mitigate risk in turbulent markets and as such should grow in importance.”
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