![]() ![]() government fears a recession, it might lower taxes to encourage consumers to spend more and stimulate the economy. Other indicators of interest to macro investors are consumer spending and taxation. If the Fed increases interest rates and decreases the money supply, this could indicate that the Fed is fighting inflation and a slowdown in the economy. If the Fed lowers interest rates and increases the money supply, this is a good indicator of expected economic growth that could drive up asset prices. Macro traders will look at the actions of central banks and governments and how their policies are influencing the economy.įor example, in the United States, the Fed controls the money supply in the economy and adjusts the interest rates. The housing crash in the United States that occurred in 2008 was a black swan event that precipitated the 2008 global financial crisis. These events have an extreme effect on affected countries' stock markets. They cannot be anticipated, but a macro investor might want to see how a black swan event historically affected an economy to gauge future risk. ![]() Bubbles usually result in an asset crash and extremely low asset prices.īlack Swan Events - Black swan events take everybody by surprise. For example, recent bubbles have been seen in the crypto and housing markets. Price Movements (Bubbles and Crashes) - Price changes in asset classes tend to occur when market prices move away from intrinsic norms. Price movements and black swan events are notable events a macro investor will pay attention to. The stock market moves up and down rapidly, and a macro investor will try to apply those movements to determine what will occur in an economy over the long term. While macro investors don't focus on technical or trend analysis of individual company stocks, they will examine a nation's stock market and look for trends that indicate volatility. Rather, investors look at all datapoints to develop an overall picture of the economic future of a company, sector, or country. No one indicator is considered in isolation. Macro traders look at these economic data at the country level and make comparisons at the country level. These will include GDP, inflation or price indices, employment rates, the housing market, manufacturing, and interest rate changes. Fundamental AnalysisĪs already discussed, fundamental analysis looks at key economic indicators. Here's a look at popular macro trading strategies. What Are Macro Trading Strategies?įundamental analysis is one macro trading strategy, but there are more. They also focus on macro trend indicators to determine whether a country is thriving or not. Macro traders, on the other hand, look more at industry-specific companies in a country. They use technical analysis to study the price trends of individual stocks. Technical traders are interested in the growth trajectory and corresponding prices of individual companies' stocks. While there is room for technical analysis when deciding on specific trades, overall, the approaches are fundamental in nature. ![]() Think GDP (gross domestic product) and CPI (consumer price index) rather than ROI (return on income) and ROA (return on assets). This is instead of growth indicators for an individual corporation and usually with a much longer time horizon. Macro trading strategy calls for analysis of economic indicators for a country. Other include commodity trading advisor global macro funds, and systemic global macro funds. An example of a global macro fund is a discretionary global macro fund. Hedge funds and mutual funds primarily use a long/short trading strategy, with the fund types being typically actively managed. They may short stocks or stock index ETFs. Suppose a global macro investor, who studies economic indicators, believes that the US economy is going to fall into recession and stocks will decline. Macro and global macro investors may buy or short stocks, bonds, currencies, commodities, and exchange-traded funds (ETFs) in certain countries. Some macro traders take a global stance and do not limit their investments to just one country. ![]() These will include GDP, employment, sector trends, and the geopolitical climate in the region before placing investments in that country. For example, a trader might focus on India and the nation's economic indicators. This is based on its macro-economic outlook. Macro trading tips to ensure your successĪn investor who macro trades forms an opinion about the direction of a country's economy. ![]()
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