OECD macro trading strategy

Single-indicator OECD macro investment strategy

The OECD system of Composite Leading Indicators (CLIs) is designed to provide early signals of turning points in business cycles - fluctuation in the output gap, i.e. fluctuation of the economic activity around its long term potential level. This approach, focusing on turning points (peaks and troughs), results in CLIs that provide qualitative rather than quantitative information on short-term economic movements. The phases and patterns in CLIs are likely to be followed by the business cycle. source

Idea: Use turning points of OECD-CLI indicator for the derivation of trading signals

In the following, select the OECD indicator from which you want to derive the trading signals. Furthermore, you also have to choose which ticker you want to trade on the basis of the chosen indicator ('Apply to ticker').
The OECD indicators are lagged by about fourty business days. Those lags have been taken into account for the performance calculation.

Typical indicator - ticker combinations are:

Strategy	Sharpe Long	Sharpe Long/Short	Sharpe Short
Euro 19 + DAX	updating...	updating...	updating...
Euro 19 + MDAX	updating...	updating...	updating...
Euro 19 + SDAX	updating...	updating...	updating...
OECD + DAX	updating...	updating...	updating...
OECD + MDAX	updating...	updating...	updating...
OECD + SDAX	updating...	updating...	updating...
OECD + SMIC	updating...	updating...	updating...
OECD + MSCI World	updating...	updating...	updating...
OECD + NASDAQ	updating...	updating...	updating...

Please notice: OECD indicators are subject to revisions. See here for further information.

Overview of current OECD allocation:

Indicator	Long / Short	Avg. duration long [months]	Avg. duration short [months]
Germany	Long since 5 months	11.7	12.2
Switzerland	Long since 4 months	10.3	9.7
EURO Area	Long since 5 months	15.5	14.4
USA	Long since 5 months	10.4	9.5
OECD	Long since 5 months	9.8	10.1

Newest OECD-CLI date (lagged by ~40 days): 2020-09-30

Double-indicator OECD macro trading strategy

Instead of only using one OECD index as a trading indicator - it is also possible to combine two of those together. In the subsequent simulation, we go long only if two chosen OECD indices support a long exposure, or when both indices give rise to a short signal, respectively.

Select OECD indicator1:		Select OECD indicator2:
Apply to ticker1:		Apply to ticker2:
	Reinvest
	Log-plot

Typical combinations are (Germany + DAX) + (Euro Zone 19, EuroStoxx50Perf), (OECD + MSCI_World_Gross_Return) + (Euro Zone 19, EuroStoxx50Perf), or (USA + SP500TR) + (OECD, MSCI_World_Gross_Return)