Markit has launched a new model to predict sector performance and market movements based on its Purchasing Manager’s Index (PMI) data.
The Markit Sector Rotation Model uses PMI data along with a number of other Markit data sets to identify sectors that will outperform and help traders understand how these developments will affect their trades.
Chris Hammond, director of research signals at Markit, said: “PMI data can be market moving and the buy-side can use the Sector Rotation model to deconstruct where those movements are coming from. They will be able to see why the PMI metric has changed and see beyond the top level signals for market movements in that sector.”
Markit said historical testing found sectors favoured by the model have outperformed those with a negative outlook by an average of 50bps per month over the past 15 years.
It uses a combination of economic, fundamental, momentum and sentiment forecasts across 10 economic sectors in European markets.
“We’re bringing together a lot datasets we have at Markit, including speciality models that contain data that is not commonly used by the quantitative buy-side, in order to forecast sector performance over long periods of time,” added Hammond.
The model is available on Markit’s Research Signals platform, which enables custom model building across equity and fixed income markets. It can also be used to augment and verify existing internal models of sector performance.