Methodology
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At the heart, our methodology is based on Trend Following. We believe that markets trend driven by crowd psychology.The most practical trends, from an investment perspective, are those that are secular (average 10 years) and cyclical (average 4-5 years).
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Secular trends are driven by long-term factors such as valuations and demographics whilst cyclical trends are driven by the ebb-and-flow of economic activity (business cycle).
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By identifying trends and measuring their internal strength, we can divide a universe of investments into distinct groups according to their risk/reward potential. We use this method to rank:
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Assets [$,€,£,¥ and C$]
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Global Equity Markets [36 major equity markets]
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Stocks [G4 equities, broader capitalisation universes, major regions, Global 500 and Global 1750 equities]
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Sectors [6 major equity markets]
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Equity Factors [8 factors across 6 universes]
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The charts below show the performance of trend ranking methodology applied to both US and UK Assets (top two charts) and Stocks (bottom charts). Quintile 1 represents the performance of the strongest trending Assets/Stocks, which significantly outperform the weakest Asset/Stocks
(Quintile 5).
USD Multi-Asset Technical Ranking Model Performance
GBP Multi-Asset Technical Ranking Model Performance
Performance only shown for illustrative purposes and does not represent the performance of any specific investment. Past performance is not a guarantee of future results.
Performance only shown for illustrative purposes and does not represent the performance of any specific investment. Past performance is not a guarantee of future results.
S&P 500 strongest and weakest stock performance ranked using Global Stock Technical Ranking Model
Performance only shown for illustrative purposes and does not represent the performance of any specific investment. Past performance is not a guarantee of future results.
FTSE 350 strongest and weakest stock performance ranked using Global Stock Technical Ranking Model
Performance only shown for illustrative purposes and does not represent the performance of any specific investment. Past performance is not a guarantee of future results.
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However, we realise that trend-following remains vulnerable at key inflexion points. For this reason, we do not only rely on trend following but also incorporate fundamental information in our decision making.
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Our economic growth-asset valuation-technical framework helps us analyse the business cycle and its associated stages. We use a number of indicators, broadly related to the three legs of our business cycle framework, for this purpose. When tracking the technicals, our custom Greed and Fear Assets Composite Rank allows us to track the technical strength of risk and defensive assets in aggregate, whilst our Global Cross Asset Valuation Monitor allows us to compare asset valuations across major asset classes.
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We put all this information together to build a detailed picture of the business cycle and use it to make appropriate investment recommendations regarding the amount of risk investors should take, as well as the investments to own and those to avoid.
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Finally, it is worth mentioning that we also have a number of unique ways of presenting information that makes it easy for our clients to get the 'message' at a glance.
© 2017. The ECU Group plc
The ECU Group plc
Registered in England No. 2296619
Authorised and Regulated by the Financial Conduct Authority.