There are several global stock indexes that are used by investors around the world to gauge the value of stocks. These indexes include specialized stock market indexes that are designed to cater to the needs of people who follow the Islamic financial laws.
Gold is a weak hedge for US stocks
Inflation is at multi-decade highs, and gold has been trading sideways for almost two years. With these conditions, it’s critical to understand how gold might be a weak hedge for US stocks.
There are a variety of methodologies that have been used to examine the effectiveness of gold as a hedging instrument. A recent strand of literature focuses on volatility spillover effects. This study conjoins an asymmetric dynamic conditional correlation model with a bivariate GARCH model to estimate the hedging effectiveness of gold against US stocks.
The study uses daily time series data from January 2013, through November 2014. The data is taken from the Bloomberg database. It includes spot prices per ounce for the US, UK, and Japan. Gold prices are largely shaped by the US dollar value, which influences the trade-weighted US dollar exchange rate.
A VAR-ADCC-BVGARCH model is applied to this data, which produces maximum likelihood estimates. The model identifies the optimal hedging ratios for all possible pair-wise combinations. These results indicate that a significant proportion of funds needs to be invested in gold in order to achieve optimal portfolio weights.
The study finds that the benefits of including gold in a stock-dominated portfolio diminish as the size of the stock market increases. However, the study does find no significant spillover from stocks to commodities.
Specialized stock market indexes cater toward investors adhering to Islamic laws
For the uninitiated, there are plenty of options in the stock market that aren’t confined to the confines of the boardroom. However, the best bets are usually found in the hinterlands of ol’ skool. The competition is stiff, so it pays to be on the lookout. One way to do it is by combining a solid stock and fund mix using a savvy robo-agent. In the process, you might just snag the top spot. Of course, you’ll need to put down a good chunk of your hard earned to do it. You’ll also need a plan B, if for example, your investment in the stock market falls victim to a fire or similar disaster. Or you could try to pick up the pieces by yourself.
The likelihood of a V-shaped recovery by the global economy is unlikely
The likelihood of a V-shaped recovery by the global economy is hardly a foregone conclusion. Although some experts believe that it is possible, a lot is riding on the timing.
A V-shaped recovery refers to a rebound that would take at least a few quarters to achieve. That is, it is not a miracle cure, but rather a slow process.
The best case scenario is a short wave of COVID-19 infections in the US. In that scenario, the stock market would see a resurgence. Unfortunately, the number of infections continues to grow. This could stall the rebound.
On the other hand, the downside scenario could lead to a shrinking global GDP by almost 5% this year. That is a big deal.
The World Bank’s latest report estimates that the likelihood of a V-shaped recovery is a non-starter. They also predict that the odds of a purely economic recovery of any type are slim.
Another reason that the odds of a V-shaped recovery are low is that the renaissance of manufacturing is still in full swing in the rich countries. However, it is not necessarily good for workers.
While there is still some optimism about a global recovery, many economists agree that the chances of a full resurgence are slim. It is important to remember that the economic recovery is a slow process.