Market insights and analysis

How dynamic, risk-managed investment solutions are performing in the current market environment

2nd Quarter | 2022

Market insights and analysis

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Updates on how dynamic, risk-managed investment solutions are performing in the current market environment.

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In one week, major indexes fell into “correction” territory, logging a drop greater than 10% from their recent peaks. Last week, the S&P 500 fell 11.49%, the Dow Jones Industrial Average fell 12.36%, and the NASDAQ 100 was down 10.54%. The main factor in the worldwide selling in the equity markets, according to most financial news stories, was the coronavirus. COVID-19 fears resulted in the fastest market correction in history.

Based on the theory of mean reversion, there is potential for markets to revert to a mean following a very steep and panicky sell-off. This is common during up and down moves. If the markets enter a bear market price structure, lower highs and lower lows are common. For this type of structure to be present, markets would need to retrace upward without breaking through highs and then continue back down below the levels established last week. According to CNBC, “History of past sudden market shocks show there could be a quick pop coming after last week’s steep sell-off based on historical analysis. … Analysis of prior market declines of 10% or more over five trading days since 1990 shows that equities tend to rebound in the weeks to follow, according to data provided by hedge-fund tool Kensho. In fact, barring an October 2008 plunge of 14.6%, every such sell-off has led to positive returns just two weeks after the fall.”

After last week, investors may be asking themselves, “Is this the big one or just a pullback?” This is the type of market activity that can lead to emotional decision-making by investors that don’t have a systematic approach to investing. The beauty of investing in a methodical, systematic fashion is that it removes the emotion from investing; data drives decisions, not emotions. According to that CNBC article cited earlier, we may be in line for a move up this week. If you had sold based on fear and emotion last week, at the time of this writing, you would have missed out on a return of almost 3%.

Our systematic strategies use data to drive decisions, not emotion. With that in mind, let’s take a look at last week’s performance of our QFC Multi-Strategy Core suite across all risk profiles.

Strategy / Index Last week
QFC Multi-Strategy Core Conservative -3.93%
QFC Multi-Strategy Core Moderate -5.95%
QFC Multi-Strategy Core Balanced -7.93%
QFC Multi-Strategy Core Growth -9.91%
S&P 500 -11.49%
QFC Multi-Strategy Core Aggressive -11.88%

Source: FPI Research (net of maximum 2.25% fees and applicable QFC fee credits)

With the exception of the aggressive profile, all of the profiles outperformed the S&P 500 after maximum fees. Our most conservative risk profile ended the week with a loss of 3.93% after fees, compared to the S&P 500’s loss of 11.49%.

One of the benefits of the Multi-Strategy Core suite is that the methodology does the work for you, including core strategy and fund selection, as well as monitoring and reallocation. Based on over 20 years of experience, Flexible Plan Investments (FPI) has found that combining actively managed strategies can provide additional layers of portfolio defense and return potential. The Multi-Strategy Core suite delivers three layers of risk and opportunity management:

  1. The management employed within the Quantified Funds used in each strategy.
  2. The movement among the funds required by the strategies themselves.
  3. The allocation employed among the strategies.

QFC Multi-Strategy Core is a turnkey strategy of strategies service that blends FPI’s Quantified Fee Credit (QFC) core strategies. The resulting portfolio, which can be customized to each client’s risk profile (from conservative to aggressive), is designed to be robust in changing market conditions.

PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.  Inherent in any investment is the potential for loss as well as profit.  A list of all recommendations made within the immediately preceding twelve months is available upon written request.  Please read Flexible Plan Investments’ Brochure Form ADV Part 2A carefully before investing. View full disclosures.



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