Visualizing Market Dynamics amid Corona Virus Fear

The bull finally caught the corona virus from humans, and the market shuddered amid the global spread.

The bull market has been going on for so long and we have been impatiently waiting for the shoe to drop. Could this be it? I don’t have a crystal ball but here is what the market looks like for the 1-month comparing to its long term averages.

Each mini pie chart is a classic model portfolio, from the most conservative to the most aggressive, forming an efficient frontier (the solid line on the top).
The actual return for the classic models for the 1-month leading up to 2020/02/28 is well into the negatives but the risk is only a bit higher than its respective long-term average.

This is what the 6-month looks like.

The actual return for the 6-month period ending 2020/02/28 is low but positive (i.e. didn’t lose money), and volatility is much lower than long-term average.

This is what the client agreed to when they took the risk tolerance test.

Client is comfortable with losing 6% in 6-month thus choosing the Classic Balanced 60/40 model portfolio.

If your client calls, what should you tell them? It is the judgement of the advisor (or rather, the firm), just like doctors having to make a judgement based on test results and all available information. This is the value that advisors can deliver that will not be replaced by robos anytime soon.

The easiest story to tell is the long-term story. You can look at the 3-year, 5-year and 10-year using the same tool to tell this story. It could the right story if you believe that the virus can be contained and the economy is strong.

But if you believe that we are long overdue for a downturn, and this could be the straw that breaks the camel’s back, you could very well be right.

Financial markets are notoriously difficult to predict; that is why we focus on visualizing facts that drive unique insights – things you won’t get from CNBC and Yahoo! Finance – to help you make better-informed decisions. Just as importantly, our visualizations make it a powerful communications platform to help you tell your story to your clients.

Visualizing Market Dynamics amid Corona Virus Fear

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