Addition of new default narratives and scenarios

Past year we introduced our general narrative dashboard. This dashboard summarizes all (potential) relevant hot topics in financial markets for the future and gives insight in to how much they are top of mind in the investment community in order to catch risk and opportunities early. We have updated our default narrative/scenario set and this post will provide an overview and descroption of all monitored narratives. These include new relevant financial narratives that will be monitored in the default model (on request user specific narratives can always be added). The mentioned dashboard/report can be downloaded here:

Feedback from users of this dashboard has been overwhelmingly positive as it helped them to catch some important 2021 scenarios and market fears in very early stages.

Catching inflation fear early

Inflation fears, the markets attention to commodities and the absence of stress and fear in the market are some of the examples that helped  users of this dashboard to navigate markets and gain insight. For some more background on our model and use cases, have look at our position paper.


Moreover we are seeing more and more that, especially fundamental investors, are recognizing the power of narratives and how it can enhance these type of analyses. One powerful example is that one of the users of our dashboard has a bearish view on Tesla based on a fundamental perspective, but seeing how Tesla narratives and related narratives (climate change, EV, general market sentiment) remain strong he has been refraining from shorting the stock until some weeks past.

That being said, the current default scenario set now consists of the following narratives.

• Bubble - Monitoring the talk and fear of a market bubble
• China - Monitoring general sentiment and fear towards China.
• China-Real_estate_sector - Monitoring specifically the Chinese real estate sector. With Evergrande still fresh in the back of investors mind fear of a full (or partial) chinese real estate meltdown can suddenly flare up
• Commodities - Commodities taking centre stage these past months. Will general consensus remain positive, become negative or will attention just fade. This narrative will provide insight.
• Covid - Though markets are seemingly becoming somewhat numb to Covid news, sudden fear negative narratives (new variants, more lockdowns) still can drive markets
• Debt - With increasing government spending and US debt ceilings always being a factor, this narratives can always suddenly become relevant.
• EU-China - Every respectable financial magazine has tension between EU and China as one of their key scenarios. This narrative captures EU - China related chatter and headlines specifically.
• Emerging_markets - Emerging markets performance will most likely the culmination of many factors. Rising interest rates, Covid outbreaks and general markets factors. These are all captured in this narrative and will help to spot changes in the driving factors early.
• Fear_s - Fear is always an important (maybe the most important) narrative to keep an eye on. Fear can rupture markets in a matter of seconds. This narrative will pick up changes in general fear levels.
• Inflation - Being one of the most relevant narrative this past months, inflation (and fear of inflation) is as important as ever.
• Smaller_caps
• Stress_scenario - Stagflations, depressions, recessions are all scenarios that can turn markets sour. This narrative will monitor the chatter about these stress scenarios and gives insight in to whether investors are becoming increasingly worried.
• Supply - Supply lines and empty magazines are becoming more of an issue with specific consequence for specific stocks.
• Trade - Trade was one of the important narratives during Trumps presidency. Along with crunching supply lines trade issues and fear of it can become relevant very quickly
• US-China - Specifically monitoring perception on US and China relation. Escalations between US - China is one of the most common stress scenarios for 2022.

In case you are interested in some additional background, more explanation on the metrics or customized narratives do not hesitate to leave us a message.