Trading equity futures using Turnleaf’s daily US nowcast
In this paper, we examine ways of systematically trading equity index futures using Turnleaf Analytics daily forecast for US CPI YoY NSA. Our equity futures strategy traded with signals from Turnleaf Analytics daily US CPI YoY NSA forecasts has risk adjusted returns of 0.85 in a historical sample since 2018, whilst long only S&P500 futures has risk adjusted returns of 0.73 during this same period. The correlation between the inflation trading rule and long only is -21%. Hence, our dynamic inflation-based strategy for equity futures, can help to diversify returns for investors exposed to long beta in equity markets. Indeed, a portfolio of our inflation-based trading strategy and long only S&P500 has risk adjusted returns of 1.13, higher than either basket separately. It should also be noted that in previous research we showed similar approaches have been historically profitable for trading US Treasury futures and commodity futures.