We've developed the Country Selector that tracks the real exchange rates of the major developed economies. By relating changes in each country's real exchange rate to changes in the corresponding bourse; we can estimate the historical relationship between the two variables. From this relationship we can develop estimates for the probability one market will outperform another. We overweight our portfolio with the countries having above average probabilities and underweight the countries with below average probabilities. Applying our process to the developed world our strategy would have yielded a 26.77 % gain for the year-the benchmark gained only 21.64%. Thus our strategy return compares quite favorably with the benchmark; yielding an outperformance of 513 basis points (Table 1).

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