MSCI, a provider of decision support tools and services for the global investment community, has integrated real-time macro-economic data from alternative data specialist QuantCube Technology into its new MSCI Economic Regime Allocator Index.

The new index allocates assets into different exposures based on a pre-determined set of rules and works on the premise that financial markets generally go through different cycles or phases, and during these cycles, different types of assets or stocks tend to perform differently. The index allocates assets to different market subsets based on the current economic regime. As the economy moves from one regime to another the assets in the index are rotated and reallocated with the aim of maximising investment performance.
  
The definition of the four different economic regimes – Stagflation, Heating up, Slow growth and Goldilocks – are based on the rate of change of GDP and CPI indicators and whether these are rising or falling. 
 
Based on historical market data from MSCI and QuantCube, recorded over a 10-year period from October 2012 to February 2023, the new index demonstrated annualised returns of 11.04% versus a benchmark return rate of 5.83%. The benchmark was based on allocating 60% of assets to the MSCI World index and 40% to USA treasuries. Additionally, looking at the most recent one-year performance of the new index, it showed annualised returns of +0.8% versus a negative return of -8.59% for the benchmark.