In recent weeks, the financial markets have experienced unprecedented turbulence, with our latest Financial Market Risk Signal Model indicating that market systematic risk is at its highest level since May. One of the main drivers behind this surge in risk has been the increasingly ambiguous signals coming from the Federal Reserve concerning the direction of monetary policy.
In this blog post, we'll delve into the elements contributing to this high level of risk and volatility, what they mean for investors, and how best to navigate these turbulent waters.
The risk signal model we have developed incorporates several variables, including volatility indices, macroeconomic indicators, global geopolitical events, and market sentiment, among others. By using machine learning algorithms and years of historical data, the model aims to provide a more accurate measure of existing risk conditions. While no model can predict the future with certainty, our model has proven effective in back-testing and short-term projections.