EQUITY RISK MONITOR HIGHLIGHTS

US earnings lift stocks, as risk accelerates

US equities closed last week at fresh record highs, but the calm implied by their milestones does not tell the full story. The Russell 1000 gained nearly 4% for the week, fueled by a labor market surprise and one of the strongest earnings seasons in years: a weaker-than-expected jobs report reduced expectations of a Federal Reserve rate hike, while an earnings beat rate of 86% helped propel the index to new highs.

Beneath the rally, however, predicted risk is climbing. The Russell 1000's short-horizon predicted risk jumped by roughly 140 basis points, an increase of nearly 11% over five trading days, according to the Axioma US51 fundamental short-horizon model. 

From a dense matrix perspective, higher stock volatility were the primary contributors to the rise in risk, while declining correlations offset some of the total risk. From a factor-model decomposition standpoint, increased factor volatility accounted for much of the move.

Weekly return dispersion among Russell 1000 constituents increased approximately 20% week over week, reaching levels near a 12-month high, while only 42% of index members outperformed the benchmark. So, the current environment remains one in which most stocks lag the benchmark, but with even higher dispersion in returns than we have experienced in quite some time. This could be related to the sharp decline in trading volume, so upward moves in prices were on thinner volume. Of course, early August is when we would expect to see trading volume fall off. 

Information Technology continues to define the market’s gains, as that sector alone contributed roughly 3 percentage points of the index's 4% weekly return. Energy was the notable exception to the otherwise favorable backdrop, declining 3% as oil prices reacted to headlines surrounding the Strait of Hormuz. Unless there is a quick resolution to the Iran conflict this volatility is likely to continue. 

The index-level rally is real, but it is increasingly being driven by a narrower group of large, earnings-powered stocks. At the same time, risk is building beneath the surface. Portfolios concentrated in today's market leaders face rising single-stock risk that headline index returns do not fully capture.

See charts from the Russell 1000 Equity Risk Monitor as of August 7, 2026:

While US tech surges, Emerging Markets tech takes a breather 

Not every geographic corner of the technology trade moved in lockstep last week. While Information Technology powered gains in the United States, the same sector in Emerging Markets moved in the opposite direction. Information Technology within the STOXX Emerging Markets Index declined 3% for the week.

This decline meant that Emerging Markets Information Technology detracted 1 percentage point from the index's overall weekly return of -0.11%, making it the single largest drag on benchmark performance. Without the sector's decline, the index would have posted a modest gain for the week.

Viewed over a longer horizon, the story looks very different. Emerging Markets Information Technology remains up 124% over the trailing 12 months and has contributed 27 percentage points of the index's 36% 12-month return. Against that backdrop, last week's decline appears more like a pause within an exceptional advance than the beginning of a broader reversal.

For investors with global technology exposure, the lesson is clear: technology is not a single trade today. Regional positioning within the sector can matter as much as the sector allocation itself. Last week's performance highlights the risks of treating US and Emerging Markets technology as one uniformly moving theme. Note that this is an important reason that using a global linked model may offer better risk management than a single, global model. 

See charts from the STOXX Emerging Markets Equity Risk Monitor as of August 7, 2026:

China's risk nears two-year high as former sector laggards rebound

China's equity risk climbed to a nearly two-year high last week, even as the market delivered one of its strongest weekly advances of the year. The STOXX China A 900 Index's short-horizon predicted risk increased by almost 200 basis points to 19% on Friday, a jump of nearly 10% in just five trading days and almost 60% above one year earlier levels, according to the Axioma CN4 Fundamental Short-Horizon model.

The weekly gain in China’s market was driven by Information Technology and Materials, both of which saw sharp reversals last week. The two sectors that had weighed on Chinese equities for weeks, surged 12% and 9%, respectively. Together, they contributed roughly 4 percentage points to the index's 3% weekly return, exceeding the market's overall gain.

The rebound is particularly notable given the recent trend. Over the trailing month, Information Technology's return remained -11% with a contribution of negative 3 percentage points to the index monthly return, highlighting how abrupt and recent the turnaround has been. While last week's performance marked a meaningful shift in sector leadership, the elevated risk backdrop suggests investors should continue monitoring the durability of the move.

See charts from the China A 900 Equity Risk Monitor as of August 7, 2026: