Investors of balanced strategic portfolios as well as effective tactical portfolios are now well aware of the benefits of reduced risk during times of market duress. While volatile markets may encourage investors to seek the historical “safe havens” of fixed income and lower risk investments, an unfortunately timed rebalance or re-allocation towards fixed income can be particularly risky in today’s environment.

The emergence of COVID-19 and its rapid spread have sparked an exceptional market meltdown and a fundamental restructuring of our daily lives. In this uncertain time, we wanted to provide you with a special video update from BCM’s Portfolio Manager and Managing Partner on the coronavirus and current market conditions.

Although none of our investment systems directly incorporate fundamental data, we enjoy contemplating the fundamental narratives reflected in the price trends our systems ultimately find attractive. Our systems are currently quite leery of equity or other risk assets, as we now sit firmly in a bear market induced by the widespread economic halt caused by COVID-19.

Last week, we shared some facts about the Bloomberg Barclays Aggregate Bond Index (BBAB). Outside of the BBAB, there are a few more items that you may want to know about in the corporate bond landscape that may also surprise you and your clients.

With the sudden drop in the global equity markets, we thought it might be helpful to remind everyone about where we have been, where we are now, and share some helpful source information.
Before we discuss the virus, let’s go back and remind everyone that U.S. large cap stocks, after demonstrating a decade of leadership, may have gotten ahead of themselves from a valuation standpoint.

What is risk? How do you measure it? In investing, risk can mean a lot of things to a lot of people. Industry professionals would typically answer volatility (VIX), standard deviation, Sharpe ratio, beta, and the list goes on. While those are technically correct, as money managers, we have to think like investors. What does “risk” mean to them?

In 2018, the Bloomberg Barclays Aggregate Bond Index (BBAB) eked out a whopping 0.01% return and thus preserved a rather remarkable streak of only having one negative year since 1999. What’s new in the evolving construct of the BBAB index, and do you know the risks that are creeping into the bond markets?

It looks like some of the issues we have been concerned about, namely rising interest rates and the trade war, have finally caught up to us. In addition, there have been some high profile missed earnings, bombs being mailed to prominent figures, BREXIT, and Italy’s budget crisis. Discourse at home and abroad is not helping. The result has been that October has been difficult to endure.