The year of the Boiling Frog

The year of the Boiling Frog. This article examines the rising risk in asset markets from the perspective of our return forecasting framework. We conclude that valuations in key markets are stretched, future returns are diminishing and the risk of loss is high (uncomfortably so). Now is the time to be reducing risk in portfolios. Our simple analysis highlights several important points: 1) The risk of loss in growth assets has been rising (rapidly); 2) Based on our forecasting framework the risk of loss has only been exceeded once since ?1992 - and that was during 2006 and 2007 - just prior to the unravelling in credit markets; 3) The current complacency gap (i.e. the difference between the implied probability of loss and the ?market's perception of risk as measured by the VIX index) was also only superseded immediately prior to the GFC. Read article and view the chart: (VIEW LINK)


Established in 1961, Schroders in Australia is a wholly owned subsidiary of UK-listed Schroders plc. Based in Sydney, the business manages assets for institutional and wholesale clients across Australian equities, fixed income and multi-asset and...

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