Reading the future in the past? A similarity index

Have we already seen market configurations similar to that of today? Based on 17 US macroeconomic and financial variables, we build a simple, yet statistical and objective measure of similarity . This similarity indicator shows that periods with the macrofinancial configurations most similar to that of today were late 1995, early 1998, early 2007 and early 2013. What lessons can be drawn from the past? The historical performances following these configurations confirm an end-of-cycle scenario, with risky assets outperforming in the short term and, at a longer horizon (between 1 and 2 years), a recession-type configuration where sovereign bonds outperform.