Markets have performed well in the last week. After running our weekly behavioral model, allocations have not changed much. We still overweight India and Malaysia as well as high yield corporate bonds.
We believe these markets will become over valued in the next year, two, or three as the behavioral model is indicating that they are slowly reaching a contrarian threshold. Our models are designed to determine when that exit point occurs.
Our agent-based market signals an interesting market to look at is Japan. Out of all the markets we study Japan is the most under valued. The US is also one of the most under valued markets. Our model is not a fundamental model and does not explain if there exist structural factors coming into play that are keeping these markets under valued which make take years before they are fixed. Therefore, we have small exposures to these markets for now, but we are looking for appropriate points to add additional exposure.
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