Home>insights>The stock market’s worst quarter since 1987:

The stock market’s worst quarter since 1987:

How Robo Advisors performed and the implications for traditional wealth managers

The stock market’s worst quarter since 1987:

How Robo Advisors performed and the implications for traditional wealth managers

The outbreak and rapid proliferation of the coronavirus pandemic rattled global financial markets in the
first quarter of 2020. Markets experienced heightened volatility and sharp selloffs as evidenced by the
VIX ‘fear’ index rising as much as six times its value, and the S&P 500 dropping 34% between Feb. 19
and March 23, only to rebound and close out the quarter at a loss of 19.6%. The traditional notion is that
robo-advisors would underperform in such market conditions, due to the absence of seasoned
investment professionals to actively navigate the downturn. Moreover, robo advisor funds are typically
comprised of passively held investment vehicles such as ETFs which are predominantly owned by retail
investors, and hence expected to deteriorate more rapidly than the broader market due to ‘panic selling’
when markets plunge. Consequently, it is reasonable to conclude that investors might be unwilling to
allocate capital towards such automated trading platforms due to the possibility of a wipe out in the event
of a similar ‘black swan’ occurrence such as the ongoing economic crisis.

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