The PARSUMO Contrarian Indicator Equity (PCE) is currently showing an equity ratio of 46,4%, which will likely lead to negative equity index returns over the next 12 months. After a temporary decline during the summer, the PCE is showing an unfavorable environment for equities.
The quarterly published NZZ Anlagepanorama, which offers an overview of the equity ratios recommended by banks and asset managers, has significantly increased after a drop in the second quarter of 2017. The average recommended equity ratio for a mixed portfolio is 46,4%, well above the historical average and indicative of the current preference for equities, which appear the most attractive alternative in today’s low interest rate environment.
Our analysis of the historical data shows, that a recommended equity ratio of 46,4% could likely lead to negative equity index returns over the subsequent 12 months.
In seven cases only have higher share quotas been observed since the start of data collection in 1996. A negative return on equities for the subsequent year was the result in six of those cases.
The PARSUMO Contrarian Indicator Equity advocates an underweighting in equities as long as the equity ratio points to an expected negative index return over the next 12 months. The current forecast for the MSCI World is –3,2%.
Note: PARSUMO Capital does not recommend making investment decisions based solely on this indicator. The conclusion from this indicator may differ materially from our Risk Regime Investing approach (RRI), especially regarding investment horizons.
Jacques Stauffer, CEO
PARSUMO Capital AG
Förrlibuckstrasse 30, 8005 Zurich
Tel. +41 43 288 29 00