Market Assumptions allow you to reflect your preferred view of the market with the 6-month Historical Range and see the impact of those assumptions in a client's portfolio.
You have the ability to look at two markets: the S&P 500 Index (equity market) and the 10 Year Treasury (bond market).
There are five default Market Assumptions choices:
- Average Return
- Last 10 Years
- Last 30 Years
- Interest Rate +1%
- Long-Term Consensus
In addition to these defaults, we've empowered you to enter your own Custom Scenario to ensure your clients capture the breadth of your expertise.
Note:
- Market Assumptions DO NOT alter the amount of performance data used to calculate returns.
- Your selected Market Assumption will only adjust the return value of each investment based on the investment's Return Mode. Volatility is unaffected by Market Assumptions.
- Since the return value is impacted by Market Assumptions, the 95% Historical Range may shift.
Average Return:
When calculating Average Return, Riskalyze uses price history from June 2004-present. This return mode is best suited for investments that have unique (typically active) objectives where traditional beta adjustments or capture ratios understate the investment's realized risk/return characteristics.
For investments newer than June 2004, the Average Return will be calculated using inception to present price history. Average Return uses the industry-standard compound annual growth rate calculation (CAGR) as follows:
= ((final price / initial price) ^ (1/number of years)) - 1
For more information check out our quick reference guide about Average Return Methodology.
Last 10 Years:
This Market Assumption utilizes a 10-year rolling historical average for the S&P 500 and the 10-Year Treasury when analyzing portfolios.
Note: This market assumption is not a “live value” and is updated annually on January 1 of each year.
Last 30 Years:
This Market Assumption utilizes a 30-year rolling historical average for the S&P 500 and the 10-Year Treasury when analyzing portfolios.
Interest Rates +1%:
This Market Assumption demonstrates the effect of a 100bps increase in the 10-Year Treasury over the next 6-months. The S&P 500 market assumption will match Long-Term Consensus at +3.75%.
Long-Term Consensus:
This Market Assumption demonstrates the effect of a +3.75% gain of the S&P 500 over a 6-months. There is no long-term consensus on the direction or magnitude of change on the 10 Year Treasury yield, so our default is set to 0bps (flat outlook).
The long-term consensus of +3.75% is derived from 827 months of data from 1950 to the present.
To learn more, visit our Enhancing Our Market Assumptions and Young Investment Analysis blog post.
Custom Scenario:
This Market Assumption allows you to enter your unique market outlook over the next 6-months and see the effect of those assumptions on portfolio analysis.
Frequently Asked Questions
How do I enable market assumptions within Riskalyze?
To find your account-wide default market assumptions navigate to Menu > Settings > Account Details > Risk Model.
Make sure Advanced Risk Modeling (ARM) is toggled on. To learn more, visit our Calculating the 95% Historical Range KB.
Note: Some enterprise subscriptions have this feature intentionally disabled for compliance purposes, so if you don’t see this option, we recommend reaching out to your home office if you’re on an enterprise contract.