During a crisis, such as the one we’re experiencing, there is a natural tendency and desire to react. This is how we have survived as a species. Reacting quickly when situations appeared tenuous often improved our chances of survival. Though, sometimes doing nothing is the better course of “action”.  One such scenario is where we have no analogs or historical parallels which can inform our decisions, and no clear visibility into the future.

This is one of those times. Unprecedented events have precipitated an unmatched shock to the world economy, asset prices have behaved in a dramatically volatile fashion and investors are concerned about both the extraordinary rate and magnitude of change.   In this situation, we must consider multiple, potential versions of our future and determine which signals might point to a probable path.

What signals can offer directional indicators of change?

  • Macro-economic data (e.g. growth, inflation, debt levels, employment)
  • Asset price trends (e.g. commodities, foreign exchange, real estate)
  • Geo-political environment (e.g. de-globalisation, nationalism, populism)
  • Central Bank Policy (e.g. interest rates, quantitative easing, money supply)

What signals can indicate the speed and severity of that change?

  • Significant shifts in asset class correlations (e.g. equities vs bonds)
  • Shift from fiat currencies to non-traditional stores of value (e.g. gold and cryptocurrencies)


If the future is simply an evolution of the past, historical relationships and correlations will persist and traditionally diversified portfolios will maintain their relevance. If, however, “this time is really different”, then traditional portfolios may be inadequate, and investors may need to consider truly non-traditional “alternative” approaches that offer more flexible responses to an uncertain future.


Authors: Alex Da Costa & Zubair Ladak

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