Global Macro Trading and Macroeconomics
As the name implies the global macro trader focuses on everything on the globe. This might be a bog statement but it is basically true. Macro traders have to look at stocks, bonds, commodities, currencies, and the G-10 nations at the very least. Most of course look at all these asset classes across twenty to forty countries. They do this so that they have more trading opportunities and can find the best risk reward situations possible.
Obviously if you are trading everything across the globe it would make sense to have a firm grasp on the global economy as well as a familiarity of the situation of any one country that you may invest in. So not only a grasp of macroeconomics but a grasp of individual countries as well.
One good example of a country that is a huge part of global trade but has an economy very much different from the United States is that of Japan. In the early nineties Japan entered a long period of stagflation meaning that they didn't really grow at all for the next twenty years. Their inflation has run at under one percent the entire time and occasionally they have a deflationary quarter. And this after billions of stimulus over the years and the lowest interest rates on the globe.
If you had put money to work in Japan without understanding the macroeconomic situation you would have lost or best case broken even after years and years of work. Stocks do not always go up and the long term in Japans case has been 30 years so far. Yes, macroeconomics are important.
Another great macro trade using macro economics was buying commodities in 2002. At that point we had not only had the dot com bust but also several years of under development in our natural resources worldwide.
If you had been following the global economic environment you would have been able to spot this trend and would have been able to get on board for one of the best trades in the last twenty years. You likely would have bought countries like Brazil and other emerging markets.
Most value investors turn their noses upward saying that they don't follow the economy and that they just buy stocks. Guess what stocks are affected by all of this. In 2008 they learned their lesson as many lost over half of their funds under management due to an economic crisis.
Global macro trading and macroeconomics are very much intertwined and are excellent disciplines for all investors to learn. Don't be close minded and instead broaden your horizon and you will find a lot of money out there. - 23222
Obviously if you are trading everything across the globe it would make sense to have a firm grasp on the global economy as well as a familiarity of the situation of any one country that you may invest in. So not only a grasp of macroeconomics but a grasp of individual countries as well.
One good example of a country that is a huge part of global trade but has an economy very much different from the United States is that of Japan. In the early nineties Japan entered a long period of stagflation meaning that they didn't really grow at all for the next twenty years. Their inflation has run at under one percent the entire time and occasionally they have a deflationary quarter. And this after billions of stimulus over the years and the lowest interest rates on the globe.
If you had put money to work in Japan without understanding the macroeconomic situation you would have lost or best case broken even after years and years of work. Stocks do not always go up and the long term in Japans case has been 30 years so far. Yes, macroeconomics are important.
Another great macro trade using macro economics was buying commodities in 2002. At that point we had not only had the dot com bust but also several years of under development in our natural resources worldwide.
If you had been following the global economic environment you would have been able to spot this trend and would have been able to get on board for one of the best trades in the last twenty years. You likely would have bought countries like Brazil and other emerging markets.
Most value investors turn their noses upward saying that they don't follow the economy and that they just buy stocks. Guess what stocks are affected by all of this. In 2008 they learned their lesson as many lost over half of their funds under management due to an economic crisis.
Global macro trading and macroeconomics are very much intertwined and are excellent disciplines for all investors to learn. Don't be close minded and instead broaden your horizon and you will find a lot of money out there. - 23222
About the Author:
If you need actionable trading ideas then check out The Macro Trader It is a weekly tactical asset allocation advisory publication with frequent intra-week updates for time-critical analysis and actionable trading ideas.
posted by X - Men @ 3:11 AM
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