Global Macro Trading
Global macro looks at the big picture to identify major opportunities.
What is Global Macro?
- Top-down analysis
- Economic and political drivers
- Cross-asset approach
- Longer time horizons
Key Macro Drivers
Monetary Policy
- Central bank actions
- Interest rate differentials
- Quantitative easing/tightening
- Forward guidance
Fiscal Policy
- Government spending
- Tax policies
- Budget deficits
- Stimulus programs
Geopolitics
- Trade wars
- Elections
- Conflicts
- Sanctions
Economic Cycles
- Expansion
- Peak
- Contraction
- Trough
Macro Analysis Framework
Step 1: Global Overview
- Where are we in the cycle?
- What's the dominant theme?
- Risk-on or risk-off environment?
Step 2: Regional Analysis
- Relative economic strength
- Policy divergences
- Capital flows
Step 3: Asset Selection
- Which currencies benefit?
- What about commodities?
- Equity implications?
Step 4: Trade Construction
- Entry and exit levels
- Position sizing
- Risk management
Macro Trading Examples
Carry Trade
- Buy high-yielding currency
- Sell low-yielding currency
- Profit from interest differential
- Risk: Rate expectations change
Divergence Plays
- Fed hiking, ECB on hold
- Long USD, Short EUR
- Play policy divergence
Safe Haven Flows
- Risk-off sentiment
- Long JPY, CHF, USD
- Short risk currencies (AUD, NZD)
Staying Informed
- Read central bank statements
- Follow economic data
- Monitor geopolitical developments
- Understand market themes
- Connect the dots