Markets in Focus: Narrow Yield Spread and High Crowding Pressure Equities
In the third quarter of 2023, the MSCI ACWI Index was down 3.3%, as the persistence of recessionary fears alongside surging oil prices and elevated interest rates suppressed investor optimism. Although equities were negative for the quarter, the MSCI ACWI Index was up 10.5% year to date. U.S. Treasurys had negative returns, with a 3.4% loss for the MSCI USD Government Bond Index over the last quarter as interest rates moved higher.
Because rising valuations have largely driven the equity market’s strong performance this year, investors have begun to watch for crowding in hot stocks and the potential for higher volatility.
In this virtual event we compared equity-earnings and fixed-income yields within the context of their historical relationship and highlight high (low) crowding in low- (high-) quality stocks across regions and sectors.
As a special topic, we also looked at multiple dimensions of crowding that used range of metrics to assess crowding exposure at the security, factor and hedge fund holding level.
Agenda topics:
- How is the spread between US equity and bond yields affecting asset pricing?
- Does the market need crowding and quality control?
- How to look at crowding from different dimensions?


Hitendra Varsani, is a Managing Director within MSCI´s Global Solutions Research team, based in London..