A necessary indicator with excellent experience is predicting a strong US stock exchange next year.
This would be good news at any time, but especially now with the mood of investors so pessimistic. Fear became so extreme in some of Wall Street pockets that some even claim that counterria analysis has stopped working.
The indicator I refer to is the GC00 ratio of GOLD to PL00 on Platinum. According to a 2019 study “Gold, Platinum and Expected Returning of Shares”, the US stock market is more and more increased in the next 12 months when the gold/platinum ratio is in a strong upward trend – and vice versa. In fact, researchers Darienne Huang, a former finance professor at Cornell University, and Mette Kilich, a professor of finance at the University of Southern California, have found that the ratio has better experience than most of the other better indicators that investors usually pay attention to.
This is good news as the gold/platinum ratio has increased greatly over the last 12 months, as you can see from the diagram above. The correlation between tracking the 12-month change in this ratio and the subsequent change of the 12-month change in the stock market is significant at 99% of the level of trust-higher even from the level of 95%, which statisticians often use when evaluating whether a model is real.
The gold/platinum ratio has increased by 25% in the last year, higher than 82% of all comparable indications in the last 20 years. As you can see from the table below, this puts the current ratio of solid in the apartment, associated with impressive two-digit return on the stock market over the next 12 months.
The reason for the gold/platinum ratio is a good predictor of the stock exchange, according to the authors of the study, is that it is proxy for geopolitical risk. On the one hand, both gold and silver SI00 respond to changes in the prospects for growth of the economy, as both have industrial applications. But gold is far more sensitive than platinum to geopolitical risk. When the ratio of gold/platinum increases, therefore, it means that geopolitical risk increases regardless of economic risk.
You may be wondering why a growing ratio is good news for investors in the stock markets, as an increase in geopolitical risk is not something that investors are celebrating.