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.
April 2026 Assessment
We consider average dashboard readings below 35% as indicating heightened downside risk for equity investors. As of April 2026, the resilience of the stock market and economy is being tested by the conflict with Iran. Most dashboard items weakened since the conflict began. The economic data trend, which was on the verge of moving to positive territory, is now declining in the neutral zone. The inflation trend deteriorated to negative territory as the curtailment of shipping through the Strait of Hormuz led to large increases in energy and agricultural prices. The impact of the war on price momentum and credit spreads reduced those dashboard items as well. Equity Value remains in negative territory, as has been the case for more than a year. As of the end of April the average of all dashboard items was on the verge of falling into the danger zone.
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. There is a danger of the second condition becoming present as well, if the Iran conflict continues to weaken the global economy.