The latest quarterly Synthetic Systems chart appears below.
A few reminders. Synthetic Systems is a computer forecasting model covering five asset classes: Treasury bills, Treasury bonds, stocks, copper & gold. The plots are all on the same basis so as to be directly comparable: Total return. So the slope of one asset rising more than another indicates outperformance, and vice versa. Plots are in natural log space so that the same vertical increment means the same proportional (percentage) increase regardless of vertical position. The total returns are not denominated in dollars or any other currency, but are relative to each other.
Bills refers to US Treasury securities of effectively zero maturity and duration. Bonds refers to US Treasury securities of effectively infinite maturity (duration reciprocal of yield), but approximates the returns of real world long maturity Treasury funds like VGLT and TLT. Stocks refers to the entire asset class (not just US or any one country). Copper and Gold represent the respective elementary commodities, except to note that while the Copper history is pure copper, the forecast better represents industrial physical commodities as a class and is broadly indicative of trends in goods and services price inflation.
The charts are best considered together. Annual and quarterly charts are respectively grouped together on dedicated pages under Market Analysis to facilitate this. The forecasting accuracy of Synthetic Systems is best evaluated by comparing successive charts, as the “Projected” time frame of an earlier chart slides to the left into the “Actual” time frame of later charts.
Readers should bear in mind that Synthetic Systems forecasts comprehensively reflect financial and economic forces (e.g inflation, interest rates, monetary policy, money flows, seasonality, natural resources, technology, demographics, the business cycle, global economic trends, consumer sentiment, investor psychology, momentum, mean reversion, etcetera), but do not reflect external noneconomic factors (e.g. natural disasters, pandemics, unexpected geopolitical disruptions) until they are incorporated into the financial and economic sphere. It’s most applicable over time frames from one quarter year to four years … its accuracy is limited by noise and news flow on time frames less than a quarter year, and it also does not attempt to model drivers of long term (in excess of four years) returns such as valuations. Readers are encouraged to consider Synthetic Systems forecasts in conjunction with fundamentals and valuations.
Synthetic Systems 2022.25