BCA Indicators/Model

We are introducing a quantitative equity country allocation for the MSCI World universe. Currently the model recommends overweight U.S. and eurozone while underweight Japan, U.K., Canada and Australia, broadly in line with our judgement except that we are more bullish on Japan than the model.

Central banks follow backward-looking indicators but economies follow forward-looking indicators. So which indicators should investors follow? And what is the current message? Also, we see signs that London is cooling.

Our first report, Introducing ETS: A Top-Down Approach to Bottom-Up Stock Picking, discussed the theoretical underpinnings of our model as well as the reasons why one should take stock market anomalies into consideration. However, the report did not delve into the specifics of how one should use ETS in practice. In this report, we will address this question.