STREET DOGS: What happens when robots turn bearish?
SA’s first machine learning-powered asset manager says its aggregate uncertainty metric has hit historic levels
What happens when robots turn bearish? Some of the answers to that question came to us in a note sent last week from Epic MSL Group that goes something like this: SA’s first machine learning-powered asset manager, NMRQL Research, says the aggregate uncertainty metric of its investment algorithms is at levels only seen a handful of times historically — for example, just before the 2008 stock market crash began. According to Stuart Reid, chief scientist at NMRQL Research, this uncertainty has resulted in the asset manager’s Balanced Fund reducing its exposure to equities significantly (by 20%) and increasing its exposure to cash. Previous examples of such periods of uncertainty include: • August 2006 — after the Federal Reserve changed its interest rate policy; • September 2007 — just after the "quant crisis"; • February 2008 — just before the collapse of Bear Stearns; • November and December 2014 — again when the Federal Reserve was debating rates; • August 2015 — just before the 201...
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