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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:
StrategySharpe LongSharpe Long/ShortSharpe Short
Euro 19 + DAX
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Euro 19 + MDAX
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Euro 19 + SDAX
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OECD + DAX
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OECD + MDAX
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OECD + SDAX
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OECD + SMIC
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OECD + MSCI World
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OECD + NASDAQ
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Select OECD indicator:
Apply to ticker:
Reinvest
Log-plot


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

Overview of current OECD allocation:
IndicatorLong / ShortAvg. duration long [months]Avg. duration short [months]
GermanyShort since 2 months11.512.4
SwitzerlandShort since 6 months10.38.9
EURO AreaShort since 28 months1514.9
USAShort since 3 months10.99.9
OECDShort since 3 months11.311.5
Newest OECD-CLI date (lagged by ~40 days): 2020-04-30




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)