Key questions answered after the faster bear market ever
Even for those of us who have been in financial markets for 15+ years, the past week and especially last night was a challenging one for all of us. Last night the U.S.’ S&P 500 had the 5th largest single day decline at -9.51%. This is the 2nd time this week we had a daily decline of over -7.50% in the S&P 500 Index. We mentioned this in our last Market Insights but what truly caught investors off guard was it only took 19 trading days from February 19th to reach a bear market correction.
As an investor myself I wanted to answer a few key questions likely you’ll want to ask today:
How is my AQUMON portfolio doing?
Relative to broad markets like the U.S.’ S&P 500 Index, AQUMON’s globally diversified ETF portfolios like our flagship SmartGlobal Max (SGM) is actually holding up well and is seeing a relative outperformance of +3.31% (aggressive) to +22.44% (defensive) year to date.
Here is full breakdown (AQUMON’s returns are net of fees):
Even though we saw all many asset classes (stocks, bonds, even safe assets like gold) collectively selloff recently, being properly diversified from an asset class and region perspective has protected our clients during this market selloff so far.
Please reach out to us via email at [email protected] or Whatsapp us at (852) 6063-5706 if you have further questions. We are more than happy to help.
What happened Thursday (Mar 12)?
Due to investors viewing the coronavirus’ economic impact being worse than expected along with the U.S. government failing to provide concrete support we saw a historic level selloff last night in U.S. and global markets. For the average American who may not be so aware of the seriousness of the coronavirus, hearing of the National Basketball Association cancelling the rest of its season along with actor Tom Hanks also testing positive for the coronavirus probably hit home with many people.
The S&P 500 Index closed Thursday in bear market territory down 9.51% last night and down 26.74% since February 19th. U.S. President Donald Trump announced a financial relief package yesterday to combat the coronavirus’s economic impact but investors were not sold since they were looking for a substantial fiscal stimulus response from the U.S. government.
What is AQUMON monitoring?
In regards to the coronavirus situation there are currently 3 focuses globally:
1) Hard quarantine like Italy
2) Soft quarantine like the United States and parts of Europe
3) Post quarantine containment and mitigation like China, Singapore and Hong Kong
The next 2 weeks will be quite telling to see if Italy’s restrictive quarantine approach is effective or not so markets will remain volatile at least for the next 2-3 weeks as the coronavirus situation further unfolds. Currently both the U.S. and European countries like Italy, Spain and German are seeing +20% increase in daily infection cases with total worldwide cases now exceeding 134,000 as of Friday.
As we mentioned in our earlier Market Insights, if healthcare infrastructures gets overwhelmed this will spiral into even bigger problems so this is something we are closely monitoring particularly in the U.S. given their less restrictive approach.
Here in Hong Kong and Asia the coronavirus is more contained but as Singapore Prime Minister Lee Hsien Loong communicated to his nation yesterday, the coronavirus here is to stay for a year (maybe longer) and stringent measures may be needed. In mainland China, people are slowly getting back to work and the big question is how many new infections will result from this.
Our takeaway is:
Living with the coronavirus is likely the new normal for all of us and now is not the time to let our guard down.
Beyond the coronavirus there are other areas we are closely monitoring including the bond market. With the recent sell-off particularly in the oil front (WTI oil is -23.7% this week trading back at 2016 levels) this is putting a lot of added stress on both corporate and government bonds which may result in further default and liquidity issues.
Normally when stock markets sell-off, U.S. treasury yields fall because people are buying up more treasuries but recently, treasury yields have risen which signifies there may be underlying liquidity issues. Seeing this problem, the U.S.’ Federal Reserve (Fed) has just launched a US$1 trillion liquidity-driven repurchase agreement operation to provide financing for banks and broker-dealers so their balance sheets and positions stay afloat during this period.
Is there a rebound on the horizon?
Although we don’t have a crystal ball this is a question we get from a number of more aggressive clients. With the coronavirus’ human and economic impact still still developing logic would dictate that for markets to rebound it will require a combination of:
1) Evidence that the coronavirus transmission is under control particularly in major markets
2) Further clarity on what is the extent of its global economic impact
For now this is still unclear on both these points so for clients that are systematically buying into this market please be aware of the possibility for the market to slide further downward.
How can I protect myself further?
We obviously ask clients to think more in terms of investing long term (that is AQUMON’s DNA) but we honestly communicate to our clients if they still feel their risk level is too high they can easily tune down their risk profile in our app. All it requires is a flick of a finger in your AQUMON app’s “Holding” page like the following.
Thank you again for your continued support for AQUMON, stay safe outside and happy investing!
Ken
About us
As a leading startup in the FinTech space, AQUMON aims to make sophisticated investment advice cost-effective, transparent and accessible to both institutional and retail markets, via the adoptions of scalable technology platforms and automated investment algorithms.
AQUMON’s parent company Magnum Research Limited is licensed with Type 1, 4 and 9 under the Securities and Futures Commission of Hong Kong. In 2017, AQUMON became the first independent Robo Advisor to be accredited by the SFC.
AQUMON’s investors include Alibaba Entrepreneurs Fund, Bank of China International and HKUST.
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