Global Stock Indexes for Muslim Investors

Global Stock Indexes for Muslim Investors

Global stock indexes

Global stock indexes are the benchmarks of the global economy, and their performance is largely dependent on the economic health of the world. While these indexes are often volatile, there are times when they are relatively stable. If you are looking to invest in a broad-based index, check out some of the following:

Specified indexes cater toward investors adhering to Islamic laws

There are many indexes in the financial space that cater to the Muslim investor, and some of them are actually good. The S&P 500 Shariah is just one example of this ilk, as is the iShares MSCI World ETF. Some of these are specifically created for the Muslim community, allowing Muslims to take advantage of their wealth in the West while keeping their investment in the shariah compliant realm.

The best way to get started in the shariah sphere is to invest in a well-rounded portfolio of exchange-traded funds. For instance, in addition to the S&P 500, the iShares MSCI World ETF offers the best of both worlds, delivering exposure to the global stock markets while still adhering to the Islamic faith. As with any investment, do your research and do your homework. After all, your hard-earned money will be at stake.

You can also opt for the more hands-on route and invest in a bespoke managed fund. Alternatively, you may wish to consider a hybrid solution such as Saturna Capital’s Shariah-compliant funds. This particular portfolio is designed to deliver all the benefits of a professionally managed fund while keeping an eye on the hyjal in the shariah sphere. The Amana Growth Fund has been around since February 3, 1994 and requires a hefty $250 minimum investment.

Optimal hedge ratios exhibit huge downward swings during most financial crises’ episodes

One way to measure the financial impact of a financial stress event is to calculate the optimal hedge ratio. This is not a direct measure of the actual financial stress, but instead indicates the optimal portfolio allocation based on the hedging properties of a stock-bond market index.

A large number of firms failed to diversify their risk enough. In particular, the quality of capital at large U.S. commercial bank holding companies and nonbank mortgage originators declined significantly. Similarly, the mortgage industry’s underwriting standards fell short of the mark. Many homeowners took on debt they could not afford, putting them at higher risk of defaulting on their mortgage payments.

The best way to find out how much a crisis has affected your financial assets is to examine the optimal hedge ratio. These are calculated based on two data sources. The first is the conditional covariance of the Stock-Bond market index at a particular time t, and the other is the optimal weights of hedging strategies for different financial stress scenarios.

There is no definitive proof of the fact that a single long position in the DJGCC/Brent index is the optimal hedging strategy, but a sample size of about ten thousand data points reveals that a dollar long in this market is hedged well by a hefty 1886 cents of the Brent market.

Predictions of single-digit gains by year-end 2023

While the S&P 500 has been on a downward path since the market bottom in December of 2018, some experts predict single-digit gains by year-end 2023. These forecasts are far from a consensus. The market hasn’t posted consecutive years of negative returns since 1999, and the current level of uncertainty on Wall Street is a reflection of the depth of uncertainty over monetary policy and corporate profits.

One analyst, Bankim Chadha of Deutsche Bank, is predicting that stocks will rally through the first quarter and then begin a choppy ride to the 4,500 level in the second half of the year. Another analyst, Dejan Eskic of Kem C. Gardner Institute, expects a mid-teens drop in home prices in Utah in the coming years.

For investors, the biggest risk is that 2023 will be a dud for equities. As inflation continues to rise, earnings will likely fall. Stocks will become vulnerable when corporate profit declines by 10 to 15 percent. If that happens, investors may be wiped out.

The Federal Reserve’s prime lending rate rose to 5.5% in May, and the Fed is expected to continue raising interest rates in the short-term. However, a slow economy and lower inflation will keep rates on hold for the most part in the year ahead.

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