Top-down indicators and bottom-up screening

In our trading strategy publications, we frequently refer to our regional and sector matrices, and to our ‘equity quantitative grades’. These are the indicators that we have built in-house over the past several years, and they inform and underpin our macroeconomic convictions and all of our theoretical trading ideas:  

  • Our ‘top-down’ indicators give us an overview of prevailing market conditions in global equity markets, drawing on macroeconomic data, trend analysis on leading market indices, and sentiment indicators;
  • Our ‘bottom-up’ stock screening process grades the stocks in our global universe on earnings momentum, money flow, price momentum, quality, and value.

This bottom-up meets top-down quantitative approach provides us with a clear and consistent reference tool for use when seeking out ideas, opportunities and trends to play in equity markets on a short to medium-term basis.

Top-down indicators

Macroeconomic indicators, technical analysis and sentiment

Our top-down view on equity markets is informed by our technical outlook on leading market and sector indices, and the signals we are getting from our regional matrix and sentiment indicators.

The equity regional matrix is built of several parameters, with particular focus on trend, economies, valuation and sentiment. We use it primarily to give us a balanced indication of which regions we might prefer over others.

Our sector matrix is built in a similar way to the regional matrix, yet with three specific sector variables: earnings momentum, sector-specific explanatory factors and relative performance. 

Bottom-up stock selection

The equity quantitative screening process

Our equity quant process screens our global universe of stocks for short-term growth (i.e EPS momentum, short-term EPS momentum and sales momentum), long-term (i.e value, credit and quality), and technical/investor positioning (i.e. sentiment, flow and relative strength) characteristics, and these scores make up a stock’s total, or ‘global' grade’. An example of how the grades are presented regularly in our publications is below:

For indicative purposes only - Source: Factset., Bloomberg Finance L.P – Pictet Trading Strategy – as of 10.11.2019 *Criteria explained in the endnotes

Find out more

Themes, strategies, stock selection and more…

We always refer to our top-down regional, sector and sentiment indicators when considering themes and strategies, and combine this with our bottom-up stock screening and grading process. We have also built a number of rules-based strategies around our process; one example is our 'core conviction strategy’ - that seeks out growth momentum stocks and screens them with a low volatility filter.  All of our selection lists are available on request.

More detail on each of the specific indicators can be found in our endnotes, and please do not hesitate to contact us if you have any questions or if you would like any further information. 

Strategy Team

Trading & Sales


Useful links and further information

Quick reference for the indicators and terms referred to in trading strategy publications can be found in our endnotes.

A PDF version of this document can be found here.

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