Practical Applications of Leading Economic Indicator and Global Stock Market Returns

Abstract

In <ext-link><bold><italic>Leading Economic Indicator and Global Stock Market Returns</italic></bold></ext-link>, from the Summer 2022 issue of <bold><italic>The Journal of Wealth Management</italic></bold>, <bold>Todd Feldman</bold> and <bold>Alan Jung</bold>, both of <bold>San Francisco State University</bold>, present a market-timing strategy based on combining the Conference Board’s Leading Economic Index (LEI) with a 200-day simple moving average (SMA). This LEI/SMA strategy signals when to exit the stock market and move to cash and when to return to the stock market. In a 2015 study (<xref>Feldman, Jung, and Klein 2015</xref>), the authors demonstrated that for the US stock market, the LEI/SMA strategy outperformed other simple market-timing strategies, as well as a buy-and-hold strategy. In this article, Feldman and Jung expand their analysis of the LEI/SMA strategy and include the stock markets of the United States and seven other countries. They find that the LEI/SMA strategy performs better than a buy-and-hold strategy in all but two of those countries. Additionally, the authors show how global economic indicators can be useful in timing US market decisions.