COVID-19 has provided us with lessons in resiliency, economics, and the unpredictability of the stock market. While Wall Street appears disconnected from Main Street, we remember of the underlying economic fundamentals of our stock market system:
- The stock market looks ahead years, not months, to determine future valuations.
- Sectors are valued separately; the market values companies from many sectors to make up its full valuation.
- Market valuations do not always reflect GDP or employment in the real economy.
As one sector experiences profitability, others decline, continually changing the stock market valuations of a client’s portfolio-welcome to the new normal of the markets:
“The more economic fundamentals and market outcomes diverge, the deeper the mystery becomes, until one considers possible explanations based on crowd psychology, the virality of ideas, and the dynamics of narrative epidemics. After all, stock-market movements are driven largely by investors’ assessments of other investors’ evolving reaction to the news, rather than the news itself.” –Robert J. Shiller. Understanding the Pandemic Stock Market, July 7, 2020, Project Syndicate.
A strange market’s new normal requires a trading and rebalancing strategy that executes with great efficiency. This can only be completely accomplished through cloud native API enabled platforms aka PaaS (Platform as a Service). These platforms represent an ecosystem of technology streamlining all processes into a highly configurable and efficient system. This efficiency is critical for individual portfolios and at the household level. Without the right software, “the new normal” of volatility the propensity for some accounts tending to be overtraded or under-traded and leading to out-of-balance portfolios at critical times grows greater and greater.
At AdvisorPeak, we have the solution for overcoming this common trading and rebalancing problem. Investing in software that provides advisors with the agility they need in any market condition creates client success. As industries continue to shift positively or negatively in their performance during the strangest of markets, an advisor’s ‘human nature’ of being reactive to a short-term performance quickly corrects.
Let us show you how our PaaS trading and rebalancing software can help you during volatile market conditions and keep your clients in balance, along with their portfolios.