23.06.2022
Recession fears escalate
- how Ai helps asset allocation
- how Ai helps asset allocation
Powell’s testimony & the fall in crude oil has driven recession fears to the forefront of investors’ minds.
Traditionally, equity allocators needed to process hundreds of variables (bottom up & top down) to decide the relative winners & losers should the economic cycle turn deflationary.
Or, they can use Ai to screen global equity markets for their independent relationship with inflation expectations.
The chart below shows global equity indices. Markets to the right of the vertical line want rising inflation expectations & therefore suffer in a deflation scenario.
The y-axis is the Qi Fair Value Gap: macro-warranted fair value. Indices in red above the zero bound are rich to model, the green below are cheap.
Traditionally, equity allocators needed to process hundreds of variables (bottom up & top down) to decide the relative winners & losers should the economic cycle turn deflationary.
Or, they can use Ai to screen global equity markets for their independent relationship with inflation expectations.
The chart below shows global equity indices. Markets to the right of the vertical line want rising inflation expectations & therefore suffer in a deflation scenario.
The y-axis is the Qi Fair Value Gap: macro-warranted fair value. Indices in red above the zero bound are rich to model, the green below are cheap.
For a US equity allocator, for example, the chart immediately identifies the Russell 2000 as the most vulnerable to recession – highly reliant on rising inflation expectations & slightly rich to macro.
For anyone with an Asian focus, Singapore EWS is slightly cheap to model but it is the most reliant on reflation.
For anyone with an Asian focus, Singapore EWS is slightly cheap to model but it is the most reliant on reflation.
- Qi portal users – use Optimise Trade Selection to screen your asset class for sensitivity to inflation expectations.
- Qi API users – replicate the chart above on your portfolio’s holdings.
