Portfolio Stress Testing

What happens to your portfolio if... the recession returns?


  • What is a portfolio stress test?
  • How does it work?
  • What can I expect?

Learn about portfolio stress testing and why it matters

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What is portfolio stress testing?

  • The Federal Reserve, Wall Street banks, and major hedge funds use stress testing to project their losses in the event of the unexpected.
  • We start by asking questions like, "What happens if the dollar loses value, the economy falls back into recession, or oil prices skyrocket?" - over 50 scenarios in all.
  • Our model measures the impact of these scenarios on your investments using history as a guide,* giving you a clearer picture of the risks to your portfolio.

How does stress testing work?

  • Our software measures how the economy has affected an investment in the past.* For instance, we measure how different oil stocks behaved when oil prices skyrocketed in 2008, and how different mortgage lenders performed when home prices rose - and then fell during the 2000's.
  • The software then uses this data to project how your investments might react to a future scenario.
  • When running a stress test, each investment in your portfolio is tested against over 50 scenarios in this manner, with the results combined and summarized for easy understanding.

What can I expect upon requesting a stress test?

  • A Personal Consultation with an advisor will contact you with the full details of your stress test, and to discuss any particular concerns that you may have.
  • The advisor will walk you through potential risks to your portfolio, and can recommend a plan of action to help protect against those risks.

This portfolio stress test will simulate hypothetical forward looking scenarios based on historical data including correlations between securities prices, several economic indicators, and forward looking potential impacts of those indicators. The historical losses illustration on the following page, and the portfolio stress test itself, does not constitute comprehensive financial advice, and should not be taken as such.   Information in the portfolio stress test can never be comprehensive or a complete statement of the matters discussed or the law relating thereto. The information on this website and in the stress test report is not intended as an offer or recommendation to buy, sell or call on any security, product, service or investment. Midwest Financial does not accept any liability for any investment decisions made on the basis of this information. Please consult Midwest Financial should you have any questions regarding information contained in this section of our website.

* Past performance is not an indication or guarantee of future results.