Global Finance and Markets – Where are the Vulnerabilities

rating-in-real-time

Situation on 30-th september, 2016

Resistance to shocks, or the so-called RtS rating, measures the ability to withstand the turbulence of markets, corporations, or systems thereof. The table below reports the RtS ratings of a series of markets, as well as market segments, such as pharma, automotive, O&G, etc. It is interesting to note that systems of indices, such as ‘S&P + DJ + NASDAQ’, or the European ‘MIB + FTSE + CAC + DAX + SMI’, yield RtS ratings far below those of the single indices. This confirms, once again, that a systemic broad-scale analysis yields results that are generally more realistic than the analysis of a single index. The Global Financial Complexity Index – a meta-index of all the World’s major indices – is today at 59%, a low value that points to pronounced fragility of the entire system.

markets_3092016

While the  ‘S&P + DJ + NASDAQ’, and ‘MIB + FTSE + CAC + DAX + SMI’ systems have RtS ratings of 50% and 48% respectively, the combined system of all these indices is at a slightly lower 47%. It is worth noting that the RtS rating of the  economy of the system of 27 EU member states clocks in a 49%, very much in line with that of the ‘MIB + FTSE + CAC + DAX + SMI’ system of indices. It appears that finance and the real economy are (momentarily?) in phase, at least in terms of resilience.

The bottom line: a narrow analysis generally yields less relevant and overly optimistic results. A systemic analysis will, in general, expose fragilities that are not immediately apparent hence is of immense importance.

The chart corresponding to the above table is shown below.

markets_3092016_chart

The indices with the highest RtS rating are (today, September 30-th, 2016): SSMI, DJI, HSI, those with the lowest: CAC, MIB, FTSE.

NB. High Resistance-to-Shocks doesn’t necessarily imply high performance but, instead, points to high stability in the face of turbulence.

 

Watch out for our next updates.

 

www.universal-ratings.com

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s