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.
March 2026 Assessment
We consider average dashboard readings below 35% as indicating heightened downside risk for equity investors. At the height of US tariff uncertainty in April 2025 the risk signal was triggered. However, the signal soon recovered above the derisking threshold as actual tariffs were lower than initial proposals and the world economy showed resilience. The resilience of the stock market and economy have been tested again by the conflict with Iran. The month of March 2026 saw a deterioration in most dashboard items. The economic data trend, which was on the verge of moving to positive territory, dipped back into the neutral zone. The inflation trend signal deteriorated in March as well, due to soaring energy prices. Stocks fell sharply in March while credit spreads rose, which reduced those dashboard items as well. The sole metric which improved in March is Value, which rebounded as stock prices fell, but remains in negative territory. As of the end of March the average of all dashboard items is in the middle, near the 50th percentile.
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 yet present. Economic conditions have been impacted by the Iran war, but the magnitude of the impact has not been large enough to seriously threaten the stock market.