Qontigo ROOF™ Scores

Qontigo’s ROOF Scores were created to quantify an investor’s risk appetite. Are they bullish, neutral, or bearish? ROOF is an acronym for Risk-On/Risk-OFF. We produce two variants of the ROOF Scores per market using our fundamental multi-factor risk models: 

  1. The Style ROOF variant maps eight of our fundamental style factors.
  2. The Sector ROOF variant maps each of the eleven GICS (2018) sectors.

 

Additionally, both variants incorporate two additional metrics on the recent change in risk in the market. ROOF Scores are computed and available daily. For more information, please download our methodology documents for both the Style ROOF and the Sector ROOF.

We will be using the ROOF Score methodology in our market commentary, as well as including them in our quarterly insight webinars for discussions. Do reach out to your Qontigo representative if you would like more information on the ROOF Scores for your market.


Latest Updates

May 25, 2020: Qontigo ROOFTM Score Highlights
Sentiment remained bullish last week in all markets we track except China (which never quite got there) but momentum has declined across the board with some, US and Europe in particular, seeing lower sentiment than the previous week. Since mid-April, investor sentiment has been far ahead of market returns. The lack of positive news to trigger this confirmation bias into strong buying behavior translated into a flat market. A month-long divergence between markets and sentiment is beginning to weigh on the latter with risk tolerance declining as risk aversion begins to rise again in a warning to investors that while the odds may still look good, the goods may soon look odd. Read More >

May 18, 2020: Qontigo ROOFTM Score Highlights
Bullish sentiment continued to rise last week except in Europe and China, although Europe remains firmly in bullish territory (China never quite got there). With positive confirmation bias this strong, investors continue to think of negative economic news as, well, something else. It’s a bit like smiling as you go over the limit on your credit card because you’re thinking about the miles. Sentiment has raced well ahead of mostly flat markets since about mid-April but that momentum peaked on May 8 and started to weaken recently with daily ROOF Scores showing a decline of risk tolerance and a rise in risk aversion since May 12. Positive confirmation bias is just that, a bias, it requires positive news to turn it into (buying) action, and so far, the news has been ‘as bad as expected’, but not worse. The nascent drop in risk appetite may indicate that investors are migrating from the V-shape scenario they hoped for, to the U-shape one the data seems to describe. Read More >

May 11, 2020: Qontigo ROOFTM Score Highlights
Sentiment continues to rise with all markets now firmly in bullish territory except China. Investors are betting that the worst of the coronavirus impact is now behind them, having peaked in April, and with the planned re-opening of most G-20 countries starting in May, that the worst of the economic impact will be confined to Q2. Their confidence that both monetary and fiscal stimulus will continue to be applied to give the recovery even more momentum, has helped drive ROOF Scores even higher this past week to levels not seen since Q4 2019 after the announcement of the Phase One trade deal between the US and China. This seems to be the only weak link now; bring back trade war worries, and sentiment momentum may unravel fast. Thus far, both sides have agreed to stick with the Phase One deal, letting investors continue their climb on the wall of economic worries in front of them. Read More >

May 4, 2020: Qontigo ROOFTM Score Highlights
Sentiment is still rising, but momentum is way down. The problem investors have is that the data so far is pointing to anywhere, instead of somewhere.  CEOs took turn at the podium again last week, unable to remove the cloud of uncertainty shrouding valuations. Until recently (April 16) investors focused instead on what they could see - monetary easing, fiscal stimulus packages, declining volatility, and rising markets – all that glorious temporary stuff.  There is now, and there is later. Now is stimulus packages and easy credit, later is 15% unemployment and earnings recession. Risk tolerant investors are betting later won’t turn into now, while risk averse ones are preparing for when now becomes later. So, although sentiment has been improving since March 23rd (how could it not!), the momentum of this recovery peaked on April 16 and has been declining since.  Now will become later, so don’t try to be wise, that may turn out to be foolish (did I say that last part out loud?). Read more >

April 27, 2020: Qontigo ROOFTM Score Highlights
Sentiment powers through neutral and into bullish territory while markets pause their recovery efforts. Sentiment is now back to late January levels for all market we track except for the UK where it is back to its February highs. Markets, meanwhile, were flat to slightly lower last week. This divergence means that as positive confirmation bias built-up among investors, the lack of strong positive news last week did not provide a trigger for this cognitive bias to turn into (buying) action. Negative news (and there was some), was downplayed as it did not confirm investor’s expectations, which resulted in a flat market (i.e. no trigger for selling either). Investors feel bullish, and they will be looking for a trigger to buy in this week’s news flow (see above). Failure to get the anticipated trigger will simply make them wait another week. At this level, it will take truly negative news to make sentiment and markets turn south. Read more >

April 20, 2020: Qontigo ROOFTM Score Highlights
Sentiment continued to improve last week with all markets we track back firmly in the neutral zone now, with some, developed Europe and Asia ex-Japan, close to going into bullish territory. In a sense, the risk appetite curves follow the pandemic curves, which are showing the most improvements in Asia ex-Japan and parts of western Europe. The US having been hit last and hardest, is still lagging in both pandemic and risk appetite curves. The strong recovery in sentiment indicates that investors are buying (and paying for) a V-shape recovery scenario which, so far, isn’t being denied by CEOs, and are brushing away negative economic data as a lagging indicator. Still, as we boldly sail into the great pandemic unknown, we face a binary situation – second wave, or no second wave? Too early to tell. Read more >



Past Updates >