Downside risk dashboard
The Atlas Capital equity downside risk dashboard
This dashboard measures the risk that global equities may underperform short-term fixed income investments in the coming months. When the expected return on stocks falls below that of cash, history suggests a greater chance of equity losses.
We track five key indicators, each shown as a historical percentile relative to data going back to 1967. High percentiles generally indicate favorable conditions for equity investors, while low percentiles suggest caution. While each signal is informative on its own, their combination provides stronger predictive insight.
Downside risk is considered elevated when the dashboard average falls below the 35th percentile—a level that has often preceded periods when cash outperformed stocks.
The Five Indicators
Economic Trend
We aggregate important data across the world’s largest economies using a GDP-weighted approach. A high percentile reflects a positive global economic trend—often a signal of strength for equities. Major bear markets have typically been preceded by deteriorating economic data.
Inflation trend
This indicator tracks inflation across 14 countries. Sustained increases in inflation (a low percentile) have historically led to weaker performance for equities.
Credit spread trend
Credit spreads measure the difference between yields on corporate vs. government bonds. Rising spreads signal growing concern about credit risk—typically a negative sign for equity markets.
Value
This composite tracks equity valuations using various “price-to” metrics (earnings, sales, cash flow, etc.). While poor Value alone isn’t a strong exit signal, many large market declines have followed periods of high valuation coupled with slowing growth.
Price trend
This measures equity price momentum over the past year. Higher percentiles indicate rising prices and more positive investor sentiment.
September 2026 Assessment
We consider average dashboard readings below 35% as indicating heightened downside risk for equity investors. In September 2026, all of the dashboard items deteriorated other than Value. Most dashboard items weakened when the Iran conflict began, recovered, and now are resuming a decline. The economic data trend has moved from the high end of the neutral zone back to the middle. Equity Value remains in negative territory, as has been the case for more than a year. The inflation trend, which was positive before the war, went to negative territory as the disruption of trade from the Middle East boosted commodity prices. The most positive reading is for equity price trend, as equities continue to be supported by the prospects for Artificial Intelligence, however that trend declined in September. The credit spread trend also declined in the neutral zone in September. As of September, the average of all dashboard items is neutral, but on the verge of negative territory.
The most common starting conditions for the equity bear markets of the past were: (1) stocks are expensive, and then (2) economic growth turned down. The first condition is present — stocks are historically expensive. The second condition is not present, as economic growth remains steady.