Since the April tariff shock, equity-market volatility has surged to levels not seen since the COVID-19 pandemic. Defensive strategies, such as minimum-volatility investing, may help reduce market swings while preserving diversified equity exposure.

Heightened volatility and unusual term-structure inversion following U.S. tariffs signal prolonged market uncertainty, prompting investors to reassess risk management and increasingly utilize derivatives to strategically hedge portfolios against further disruptions.

Gulf Cooperation Council equity markets may offer diversification benefits due to lower correlations with global markets. Recent reforms and market dynamics have improved returns and reduced risks, making GCC futures a potentially valuable portfolio tool.

A clear divergence in traded regional options has emerged since early November in both maturities and relative implied-volatility levels. These shifts imply changing perceptions of relative risk in the U.S., EMEA and EM equity markets.   

Rising volatility since late September’s stimulus announcement by the Chinese government has motivated some to reassess the current opportunities and risks in Chinese equities. We analyze one tool at investors’ disposal.  

Listed U.S. real estate emerged as the second-best performing sector in Q3 2024. The recent decline in rates has likely boosted its appeal, but a more fundamental and compositional shift may have caught investors’ renewed attention. 

Interest-rate uncertainty and restructured trade networks are drawing attention to export-oriented markets. MSCI’s equity models, using foreign-sensitivity exposures, have highlighted wide differences in exporter firms’ performance across regions.  

Implied volatility, based on at-the-money options, rose in early September in several regional markets. Put-option premiums, below their five-year median, suggest protection against rising volatility could potentially still be attained at lower cost.  

After the Bank of Japan’s rate hike on July 31, equity market volatility rose sharply. Emerging and EAFE markets were less volatile than the U.S., but their volatility spreads veered in opposite directions, with the EM/U.S. spread hitting a record low. 

Sector investing offers a strategic approach for investors looking to gain exposure to distinctive segments of the economy — especially in the U.S. We sat down with experts from within MSCI, as well as with Vanguard’s, Andrey Kotlyarenko, to explore the ins and outs.

Our analysis of data spanning the last 18 years indicates that systematic options strategies linked to the MSCI EAFE and MSCI Emerging Markets Indexes have consistently exhibited lower risk and lower drawdowns compared to their parent indexes.  

Currency relationships have been in flux since early 2022. We analyze how these changes have impacted global equities and outline the economic and political events that could influence fixed-income performance over the balance of 2024. 

Over the last 20 years, most U.S. sectors had low performance correlations, suggesting that sector rotation strategies had the potential to improve portfolio return or that combining less-correlated sectors had the potential to reduce portfolio risk over that period. 

Investors contemplating putting their cash to work over the balance of 2024 may wish to consider the impacts of the changing equity-credit relationship and growing regional disparities as they revise their allocations. 

Indian firms have made notable strides in managing their financially relevant sustainability risks over the last five years. Understanding their progress could offer valuable insights to investors in India’s equity market.    

The wide gap in U.S. T-bill and equity volatility levels appears to reflect varying perceptions of risk. The historically low hedging premium implies a lower cost to insure against higher equity volatility, should that be the scenario that unfolds.

A sector-based perspective of the Indian equity market, one of the emerging beneficiaries of global power shifts, indicates the valuation premiums of most sectors are high in historical terms and relative to sectors in other emerging markets.

No clear guidance presently exists on ESG and climate reporting for derivatives. Using input from market participants, regulatory guidance and a survey of existing research, we propose a framework for more transparent reporting to include derivatives. 

Higher equity and bond correlation combined with increased index concentration suggest now is a good time to revisit allocations across regional, country, sector, style and thematic exposures for adequate portfolio diversification. 

The cost of hedging downside equity exposure has fallen substantially versus eight months ago, markedly lowering the price of insurance against rising equity volatility.

The rally in the first half of 2023 shared some similarities, and had notable differences, with past concentrated rallies. In addition to AI, structural megatrends, such as the blockchain economy and robotics, helped drive the rally. 

Global equities, as measured by the MSCI ACWI Index, roared back through May of 2023. A closer look, however, revealed that just a handful of stocks accounted for more than 70% of the total return. Which stocks punched above their weight? 

Derivatives linked to climate investing are in the early stages of product innovation and investor adoption. We compared the impact, financial risk and opportunity metrics for futures on the MSCI Climate Action Indexes.  

Following up on research showing why more short-dated options did not increase equity-market volatility in the U.S., we ask a similar question across regions to help global investors evaluate their portfolios.

Trading of U.S.-listed options more than doubled in 2022 compared to 2019 — as investors gradually gravitated from monthly to weekly to even daily options over those four years. Some have wondered if this could lead to greater equity-market volatilty.

After the collapse of Silicon Valley Bank and UBS’s takeover of Credit Suisse, what does the options market indicate for equity-market volatility in the months ahead?

Investors benchmarked to global and regional indexes may use index futures for hedging or asset-allocation decisions. We analyzed the intra-day volume patterns of futures linked to the MSCI World, MSCI EM and MSCI EAFE Indexes to illuminate pockets of liquidity.

India is the world’s fifth largest economy and one of the fastest-growing major markets. We believe that futures linked to the MSCI India Index could help capture a deeper opportunity set and manage Indian equity exposure. 

Geopolitical and macroeconomic risks have persisted, and investors remain concerned about ongoing turmoil. We assess market volatility while analyzing whether investors are hedging their portfolios going into the final quarter of 2022. 

With the MSCI World Index down 20.3% in the first half of 2022, equity hedge funds have not been immune to recent market volatility. We evaluate how equity hedge-fund exposure has changed in terms of sector and style factors.

While investors may aim to synthetically replicate equity indexes using a basket of local-index futures and currency forwards, our research focuses on potential country and currency risk as well as tracking error of these efforts. 

In the face of continued global equity-market volatility, we turn to the listed-options market to gauge investor perception of market risk over the coming months for EAFE, emerging markets and the U.S.

Faced with volatile markets, some have looked to options strategies to manage volatility or target alternative risk/return profiles. We evaluate historical performance of options-overlay strategies across various macro and volatilty regimes.

As commitments to reach net-zero by 2050 surge, institutional investors are looking for tools to implement net-zero strategies in portfolios. Futures linked to the MSCI Climate Paris Aligned Indexes are one option for asset managers and asset owners.