The “True Art of Investments is Boundless”: Confident of Record Performance in 2020
As the markets contemplate the ‘darkest week since the global financial crisis in 2008’, experts have warned that it could take months, or perhaps a year or two for a full-scale crisis to resolve. For most of the world, this would spell disaster, especially central banks and monetary authorities; yet for some, the uncertainty represents a spectrum of opportunities for investments. As a Chinese investment firm, Fa Xian Xian Ji (Beijing) Investments Co., Ltd. describes it somewhat philosophically, “The true art of investments is boundless.”
In a week which began in the worst possible fashion, as news of Saudi Arabia and Russia heading into an outright oil price war for global market share emerged, global equities plunged into mayhem as soon as trading opened on Monday. The S&P 500 Index has dropped almost 30% since February 19, while the FTSE lost 11% in its worst single day loss on March 12, as major indices around the world took a beating, before a late rally on Friday renewed optimism in some quarters.
Central banks, including those of China, Norway, the US Federal Reserve and European Central Bank, responded with a series of stimulus measures in an attempt to calm the markets and restore confidence. Despite a marked resurgence, traders have remained largely unconvinced. Undeniably, the global economy has officially slipped into bear market territory. Despite the seemingly bleak outlook, Fa Xian Xian Ji remains confident of surpassing their previous year’s performance.
Harvey Lee, Chief Investment Officer at Fa Xian Xian Ji, explained with assurance, “Using our predictive analytics system, we have been able to systematically identify and uncover sources of alpha to maximize investment returns efficiently and what is happening with the markets now could not have affected us less.”
While the entire world is preaching doom and gloom, it is easy to forget that the equity market is essentially a zero-sum game. While the statement is overly simplistic in a practical sense, one cannot deny the fact that there are clear winners and losers in any stock market situation. What sets them apart, however, appears to be a combination of expert foresight and manouvring in tricky situations.
Beijing-based Fa Xian Xian Ji develops their own predictive analytics systems and algorithms, based on both quantitative and fundamental approaches, and have achieved significant results thus far.
“We (Fa Xian Xian Ji) have been consciously removing the human equation from our trading decisions from day one. It has allowed us to perform optimally even in difficult circumstances like now. We as humans are flawed in our decision making collectively. For example, people making runs for meaningless items, or performing mass selloffs at the hint of a crisis. It is completely irrational and suboptimal in terms of investment returns,” Lee further elaborated.
“Our predictive analytics are able to identify and act on profitable signals that us humans are unable to spot, even in bear market conditions. For example, black swan events such as the coronavirus pandemic tend to have a pulsating effect on the economy. It gives us the opportunity and impetus to capitalize on a difficult situation. We expect to exceed last year’s performance by mid-2020, comfortably.”
Indeed, history suggests that stock market crashes presents a fantastic opportunity for both short- and long-term investors. For one, global equity markets tend to recover from short-term setbacks eventually, as witnessed in the 1997 Asian financial crisis and 2008 mortgage subprime crisis, among several others. Taking a Buffett-like approach to the market turmoil could possibly be the answer. Many blue-chip stocks are now trading well below their peak prices, offering long-term investors buying opportunities and value potential unseen since 2008.
On the other hand, the insane level of volatility displayed in the past week represents an entirely different range of investment opportunities. In quantitative volatility trading terms, if harnessed correctly, it would equate to a higher number of trade triggers and greater margin potential, while providing hedging possibilities against the fledging equity markets.
Against this backdrop within the current economy, what is the next step for investors? In the absence of costly and sophisticated systems, the average investor should “tread lightly” and “trust the professionals to do what they are good at”, as Lee further stated, “It (the current situation) can be overwhelming, especially for individuals. Large funds tend to have the clout and resources to navigate the situation better. It has been proven time and again that established hedge funds are more than capable of dealing with the crisis in the long-term.”
Lee may well be spot on in his verdict, as a recent Bank of America report, dated March 2, revealed that the majority of large-cap mutual funds outperformed their benchmarks in February. “Excellent stock picking”, it seems, is the reason for such performances in the current climate, as pointed out by the Bank of America equity and quant strategists in the report.
The real test comes on Monday when the market reopens but if Fa Xian Xian Ji’s confidence is anything to go by then the company could possibly witness a tipping point in artificial intelligence assisted trading technology adoption within the financial industry.