We often focus on the major stock indexes when trying to understand how the markets are doing. Take the MSCI All Country World Index, for example. It tracks stocks across both developed and emerging markets, producing a pretty good snapshot of global equity performance.
But sometimes that is not enough. It is one thing to know how much the market is rising or falling. It is another to know how many markets around the world are actually participating in the move.
That’s what this week’s indicator is designed to show.
Let me walk you through it. The green line tracks the MSCI All Country World Index over time. The orange line underneath it is the Global Big Mo Tape Composite. This metric looks at momentum and trend signals from dozens of country stock markets and blends them together into a single reading. When many countries are trending higher at the same time, the indicator rises. When fewer markets are participating in the uptrend, the reading falls.
When the indicator moves into its highest range, it means global momentum is broadly positive. Historically, that has been a supportive backdrop for stocks. But the opposite tends to happen when the indicator dips deeply negative. Those are the periods I have highlighted with shaded areas on the chart. Times like the early 2000s bear market, the financial crisis, and the pandemic selloff all saw global momentum break down across many markets at once.
That is the key idea behind this indicator. It is not meant to predict the market’s next move. Instead, it helps show whether the underlying trend is broad and healthy or whether participation is starting to weaken.
So what is it saying right now?
For the most part, the signal is still fairly constructive. The Global Big Mo Tape Composite is sitting near the upper end of its historical range.
But it has started to drift lower in recent weeks and is approaching the point where it would slip out of its most bullish zone and into what you might call a high-neutral range.
That would not be a bearish signal. A high-neutral reading would still suggest that many global markets are holding up reasonably well. But it would indicate that the broad, synchronized strength we saw earlier may be starting to cool somewhat.
This is one reason I think this indicator will be important to watch in the coming weeks. In our primary stock market risk model, the broad category we call “participation” is currently sitting at a neutral reading. At the same time, we have started to see a gradual breakdown in the number of world stock markets that remain in technically defined uptrends. If this indicator also slips into neutral territory, it could begin to reinforce that shift and potentially introduce some additional weakness into the overall model.
The bottom line is that the message remains positive for now. Global momentum is still on the strong side of the ledger. But with the indicator hovering near the edge of its most bullish zone, it is something we will be keeping a close eye on in the weeks and months ahead.
This is intended for informational purposes only and should not be used as the primary basis for an investment decision. Consult an advisor for your personal situation.
Indices mentioned are unmanaged, do not incur fees, and cannot be invested into directly.
Past performance does not guarantee future results.
The MSCI ACWI captures large and mid cap representation across 23 Developed Markets and 24 Emerging Markets countries. With 2,935 constituents, the index covers approximately 85% of the global investable equity opportunity set.