January 08, 2022

All investors face capital-market risk. Managing that risk, evaluating opportunities in the context of their goals, and assessing specific investments efficiently requires broad, objective, close-to-the-capital-market thinking. A global allocation framework does not need to be a black box that processes many statistical variables and then spits out an investment plan. It should be a logical framework that lays out choices for investors. The LJE process strives to accomplish these objectives. It summarizes in a logical and consistent way the investment choices recommended by our assessment of the coming economic environment. Our process estimates the probabilities of the individual countries outperforming the world benchmark. Taking advantage of the additive properties of our strategy, we aggregate the individual countries stock markets and build up broader regional and/or stage-of-development indices to which we apply our strategy. Thus, given the countries’ stock market capitalizations, aggregating the individual country indices we can replicate many of the regional indices for the developed, emerging and frontier markets. The logical progression of the aggregation process leads to the construction of the broadest indices such as the world, and the world ex-US. The Year-to-Date Performance of the capitalization weighted global strategy is firing on all cylinders. The global tilt strategy with a 16.09% appreciation and the global buy portfolio with a 21.22% gain outperformed the 14.75% increase posted by the global benchmark. In turn, the global sell portfolio with a 3.36% gain, underperformed the benchmark as expected.

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