Equity returns are sensitive to earnings and the price-earnings ratios. Earnings are sensitive to boom bust cycles, i.e., economic growth.
However, pre-empting booms and busts are challenging since GDP figures are published with a lag and are subsequently revised. So, we can be up to six months behind schedule; this is rather late for a portfolio manager.
Here, we propose a real-time bust tracker ranging from 0% to 100%, by country, and at a world level. Bad news: It reaches 95%.
Information technology changed the world from knowledge transmission bottlenecks to instantaneous access and worldwide diffusion of non-events. Does this drastic change help investors decide between buying equities or bonds?
Well, look to our Youngsters!