EidoSearch’s Top Three Market Projections For 2015

Dec 23 2014 | 5:03am ET

It is that time of year again when prognosticators make their big market calls for the coming year.

EidoSearch—a cutting edge software company that applies advanced information processing techniques to make the world's time series data searchable—shared three of their predictions with FINalternatives. They include a big run up for an emerging market, a couple of large cap energy stocks rebounding and an improvement in prices for a key commodity.

#1. South of the Border: Mexico full year projection…Muy Bien!

We started with a look at Global Markets to see what countries seem primed for outsized returns in 2015, and Mexico (BMV IPC) has the highest projected return and risk/reward ratio of any global exchange.

The Index was up 21% last year between mid-March and mid-September, but gave up those gains in Q4 and is actually down a bit for 2014 overall even with last week’s rally. The Fed said it will be “patient” on the timing of raising interest rates is good news for Mexico, which typically encourages demand for higher yielding emerging markets where valuations are currently pretty appealing. A rebound in Energy prices next year should also help drive growth in Mexico with their recent efforts to encourage energy exploration in the region.

Using EidoSearch we went back to the late 70’s to find the most similar instances of the BMV IPC’s (FMEX) current one year price trend, to capture the historical one year returns of these similar environments and to project a typical and range of probable return outcomes. Although not quite statistically significant, the data is still compelling.

  • We found 24 similar instances dating back to 1983
  • In 21 of 24 instances (87.5%), the FMEX is up in the next one year and the average return is 43.4%
  • We actually excluded one instance, from 1985-1986, where the index was up over 500% and skews the results to the positive even further
  • The worst performer of the 24 is from 1998 to 1999, and is down -21.2%. The best is 1985 to 1986, with a return of 236.9%

Forward returns of the 24 most similar instances of the current one year price trend in Mexico’s (BMV IPC) historyForward returns of the 24 most similar instances of the current one year price trend in Mexico’s (BMV IPC) history - click to enlarge.

 

Here are the 5 most similar comps in order from 2002, 1999, 2010, 2004 and 1997, and with the current 1 year price trend in overlaid in blue.Here are the 5 most similar comps in order from 2002, 1999, 2010, 2004 and 1997, and with the current 1 year price trend in overlaid in blue. Click to enlarge.

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