Technology for keeping measure of the Trump rally
Markets are on the move. How is an investment strategist supposed to keep track of what markets are getting overheated and which still look cheap? Trust us, you can do it, but Sophograph can help.
Since the US Presidential election, all sorts of markets have been gyrating. The S&P 500 is up 2%, the Dow Jones US Financials Index is up 7%, US dollar is up 12% against the Mexican Peso, and US 10-yr treasury yields have leapt up by 45 basis points (an eye-popping 24% percent of their yield on November 8).
These are always trying times for anyone whose job is to keep track of investment strategy — everything is moving all at once.
And yet, of course, all these market moves are related. You’re not so naive as to think “yields are higher so let’s sell equities and buy bonds.” Higher US growth and inflation expectations are behind at least some of the move in equity markets, the stronger US dollar, and higher yields.
If you think the markets are right about higher growth and inflation, the next step is to build models for the expected relationship and then see if the market moves match, exceed, or undershoot those expectations. That is how investment strategists get a sense for where value is in rapidly changing markets.
So far so good. It’s normal to build those models on your technology of choice — Excel, Python, MATLAB, or even trusty old pen and paper.
The morning after
But, much like any frenzied activity, the morning after is when problems arise.
After doing the hard work of building an intellectual framework for analyzing different markets, what do you do when some of the data starts to change. What do you do when the data changes every day?
Do you turn the page in your notebook and start writing all over again? Do you open up your six spreadsheets with 10 tabs each and start manually updating numbers?
And what if your boss wants to know how these models did during the last rate rise in 2013? What if your client wants you to run some scenarios on these models?
Purpose-built — for this purpose
All of this can be done on pen and paper or by keeping uplibraries of Excel spreadsheets. But there’s a better way.
That’s where Polly Portfolio’s Sophograph knowledge management system comes in. It’s a purpose-built system to manage knowledge — the knowledge and expertise encoded in your financial market models.
- Sophograph has built-in functionality to manage input data; if you can get the data onto your computer, you can get it into your Sophograph instance, so you can walk into the office everyday with all your models updated.
- Sophograph supports simple arithmetic models (“US interest rates are equal to inflation expectations plus growth expectations”) or sophisticated econometric models using a Python interpreter.
- You can create multiple versions of models and compare them to each other.
- You can run scenarios by creating different sets of assumptions on input scenarios.
Read more in our enterprise software announcement, or visit us here for more information and to sign up for a trial of Sophograph.
Please leave a comment or email us at info@pollyport.com to start a conversation, or subscribe and follow us on Medium for more thinking about the digital investing and wealth business.
And if you enjoyed the piece, let us know by hitting that ♡ below!
