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ETFS: ACWI VT IOO - GLOBAL EQUITIES TEAM, April 27, 2017


Our current trading signal for the world stock index (ETFs: ACWI, VT, and IOO) is BUY. The research of the global stock market composite is systematically driven. Because the cycle of the aggregate index is influenced by a set of series chronological turning points for many different countries, a large number of fundamental components are included in the model's construction. Some of the most important drivers are monetary policies and money supplies of major countries, consumer confidence, corporate profits, housing market sales and prices, employment growth, business climate, home building activities, manufacturing surveys, personal income, capacity utilization, private and public expenditure, lending growth, credit demand, foreign exchange reserves, budget deficits, trade and current account balances, private and public debt, foreign investment flows, volatility, inter-bank liquidity, credit spreads, inflation rates and expectations, and fund flows. We use an econometric model of global economic and market supply/demand to project turning points in global stocks and estimate the degree of misalignment between actual and equilibrium index values.



Based on a scale from 0 to 100, with 100 being the most bullish and 0 being the most bearish, our latest model reading for the world stock index is 58.88. The average return of the trades is 52.42% and the annualized return of the trades is 11.48%. Measuring the risk-adjusted performance, the model has produced a Sharpe Ratio of 0.89, which is driven by the model's standard deviation of 12.87%. For comparison purpose, the Sharpe Ratio of the buy and hold strategy for the world stock index is 0.33. The Sortino Ratio, which measures the relative returns of the model over its downside deviation of 7.81%, is at 1.24. The Calmar Ratio, which is the ratio of the average return over the maximum drawdown, is at 0.54. The calculation of the model for the world stock index took 7.42 hours per CPU core to complete at our central computation workstations, which are a group of powerful computers that perform statistical computation continuously 24 hours day and 7 days a week to produce real-time trading signals for the world stock index.



Our model reading signals that there will be decent upside potential for the MSCI world index. Therefore, our tactical view of the MSCI world index is constructive. The table below shows selected drivers that have significant recent updates. They are among the large macro database on which we perform statistical analysis to project future price trends and develop investment views. We do not rely only on any single factor to model our investments. Instead, the cross relationships of all the factors and time series are researched back over many market cycles in both periods of secular bullish and bearish trends. The goal of our algorithm is to identify profitable buy and sell opportunities and optimize the risk/return profile for the world stock index.




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