Finding compelling slices of global markets to overweight isn’t getting any easier. After an extended run higher in much of the world’s risk assets, the low-hanging fruit has been picked. But there’s always relatively attractive markets. All the usual caveats apply, of course, but beggars can’t be choosy.
As an example, consider a new column of data — Spread — that’s now part of the periodic return estimates for the major asset classes on these pages (see this introduction for background). The basic idea is the new addition to the numbers is to identify markets with trailing 10-year returns that deviate substantially from the performance forecasts (based on averaging three models, which are defined below). The logic: If asset x has a trailing return substantially below the expected return, there’s a case for overweighting (and vice versa).
