Equity versus fixed income: the predictive power of bank surveys

Bank lending surveys help predict the relative performance of equity and duration positions. Signals of strengthening credit demand and easing lending conditions favor a stronger economy and expanding leverage, supporting equity returns. Signs of deteriorating credit demand and tightening credit supply bode for a weaker economy and more accommodative monetary policy, supporting duration returns. Empirical evidence for developed markets strongly supports these propositions. Since 2000, bank survey scores have been a significant predictor of equity versus duration returns. They helped create uncorrelated returns in both asset classes, as well as for a relative asset class book.

View full post based on proprietary research of Macrosynergy.

A Jupyter notebook for audit and replication of the research results can be downloaded here. The notebook operation requires access to J.P. Morgan DataQuery to download data from JPMaQS, a premium service of quantamental indicators. J.P. Morgan offers free trials for institutional clients.

Also, there is an academic research support program that sponsors data sets for relevant projects.