Forget Noise Quant Predictive Model Shows a Bullish Trend in 2023-2024
In the world of investing, market volatility is more than just a statistical measure or risk indicator. It represents the deviation of market perceptions from reality, providing valuable information about market trends. Gradual changes in volatility may have little impact on portfolio returns, but extreme market fluctuations can be challenging to navigate.
Quant Global Research (qGR), a research wing of the Quant Mutual Fund, has come out with interesting data-driven insights about Indian market in 2023 and how the performance will be in this decade.
According to the model, accurately forecasting volatility is crucial for preserving portfolio returns and capital. qGR has studied a decade of studying market volatility, and their predictive analytics model predicted Volatility Expansion Phase (VEP) between 2018 and 2023 when the implied volatility of global asset classes will remain elevated.
Economic Momentum And Market Will Pick up In the Second Half
As we approach the climactic phase of VEP in 2023, their macro indicators suggest that economic momentum will pick up during the second half of the year. By the second half of the year, global asset markets should be propelled to a higher level and Asia-centric emerging markets, and India in particular, will lead the global market again.
Why it says so. There is a reason. Overall, long-term trends, which span a decade, are identified via Liquidity Appetite Analytics, Risk Appetite Analytics, and Perception Analytics.
The Risk Appetite indicators for DMs have peaked out in 2021 while the same for EMs are still lower. Therefore, liquidity will shift from high-risk zones to low-risk zones, with EMs forming part of the Value basket among global asset allocators.
Value Theme Will Outperform Growth-Theme
The cycle of Growth investment theme peaked out in September to October 2021, and so far, we have only seen one year of outperformance. The point to take note is the Value outperformance cycle has just begun and has many more legs to go. However, it’s important to note that this move will not be linear. There will be phases of underperformance. Also, manufacturing sector will be the leader of this decade. It is going to do what IT had done during 90s. The China+1 theme is clearly playing put beautifully.
In the world of investing, market volatility reigns supreme. Knowing how it affects the real economy can make all the difference in identifying pivotal moments and maximizing returns through strategic sector and stock rotation. Although predicting volatility may prove elusive, keeping an eye on long-term trends and taking timely measures to rebalance portfolios can help soften the blow of unforeseen risks.
