Takeaway: The Demography Sector offers a month-ahead readout of our Global Equity Forecast model for September.

Last month, we introduced our Global Equity Forecast (GEF) model. Though this model is still in the R&D stage, we were confident enough about its preliminary results to begin to share some of them with you. (For a full background on how the GEF works, see last month’s note.)

This evening, we will review the results of July 25’s month-ahead forecast. And we will present our new forecast for the next month—that is, the month starting on market close August 27 and ending on market close September 26.

(Keep in mind that we will not have final-final equity return results until tomorrow at market close. This is by design: In order to give subscribers an opportunity to trade, we stagger our projection-result dates one day ahead of our projection-announcement dates. Note also that when necessary--e.g., today--we move to the next market day when the 25th or 26th are not market days.)

Recap of last month’s August forecast. Now that the target month is nearly over, I think it’s fair to say we did well. As we expected, this has been a tranquil month for regional indexes. In particular:

  • We projected our Total World Index to go down by -0.60% and our Big 25 Index to go down by -1.30%. That very closely matches the results to date: down by -0.95% and -1.54%, respectively, at market close today.
  • Europe was near-zero, as projected. And Latin America and CIS/Africa/Mideast we got right: both slightly negative.
  • We forecast Asia to go slightly negative, but it barely eked out a positive (+0.95%). Our biggest miss—though it wasn’t large—was North America (an unweighted average of U.S. and Canada). Our forecast was -2.20%; as of this evening, it’s up by +1.38%.
  • In short, we projected that not a lot would happen around the world. And that’s pretty much what we got.

Among individual countries, our big winner was TURKEY—the only country we pointed out by name because the sigma put its confidence interval so far under zero. We said Turkey was going down. And since July 25, Turkey is down by -25%. (Of course, we couldn't forecast the Trump tariffs against Erdogan, which gave this descent extra energy!) Our record on the other individual countries is mixed, mostly because none of our calls (up or down) was statistically different from zero. Finland is up slightly as expected, Taiwan is down slightly as expected, and the Netherlands failed to grow slightly as we projected. Our biggest miss was Russia, which had a bad month (-6.8%).

Keep in mind that, for individual countries, our margin of error is considerably larger than for the regional or total indexes. These country projections, plus or minus, need to exceed these higher margins before they should be considered bettable. That’s why we singled out Turkey last month. It was bettable.

In the future, starting with this month’s forecast, we will add sigma values to our individual country calls. Please note that these are one-tailed odds of non-zero values: Thus, for one sigma, the odds are 84.1%; for two sigma, 97.7%; and for three sigma, 99.8%.

This month’s September forecast.

Please refer to the table below.

SEPTEMBER FORECAST SUMMARY: After a slight down month in August, the GEF points to tranquil equity markets again in September, with near-zero % returns both for the global indexes and for most regional subgroups. North America and Asia are projected to be slightly up; and Latin America and CIS/Africa/Mideast to be slightly down. But no regional move breaks non-zero confidence intervals. Intra-market dispersion is also expected to be lower than the historical average. Among the Big 25, the GEF identifies two movers with over one-sigma odds of upside movement: Mexico and Switzerland.

Global Equity Forecast: September 2018 - September forecast2