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Systematic risk is market-wide risk that can invariably impact individual investments and, at times, may even supersede the specific details of that individual stock.
#MACRO TRADING FREE#
(To learn more about cyclical stocks or defensive stocks, feel free to check out our sub-module for ‘ Understanding the Stock Market.
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What mattered was global equity markets that were aggressively selling-off and that dragged down even the strongest of high-flyers along with it. It didn’t matter at that point what Apple’s earnings guidance looked like – or how many cars Tesla said that they’d sell. Even high-flying stocks like Amazon, Tesla and Apple were hit incredibly hard, with each dropping by more than 20% in about a month. Take for example the sell-off in February and early-March of 2020 as the coronavirus pandemic was getting priced-in. While this could be for any number of reasons, the fact of the matter is that the environment is important – and if stocks in that economy are in a steep sell-off, even the strongest of companies may not remain unscathed. Have you ever bought a stock based on good analysis, and with strong rationale with the following days showing the opposite reaction from what you had expected, with the stock price going down instead of up? Global Macro: Why is Systemic Risk So Important? Global macro trading will often focus on large asset classes such as equity index futures, commodities, foreign exchange and, even individual stocks on some occasions. The linkage, in this case and many others, is commodities, as both Mexico and Norway have considerable operations in oil extraction. This can be even more reason to follow an economic calendar as a rate decision in Mexico may bring impact in Norway. The counter-side to that, which is often present in the realm of markets, is that keeping up with global macro can be a more daunting task, considering that economic events are literally taking place 24 hours per day rather than just the business hours of ones’ own domestic economy. This is an extremely flexible strategy as it opens up a considerable number of options for the trader, analyst or investor. What is Global Macro Trading?Īs described by famed money management firm, Doubleline, macro can be characterized as ‘go anywhere, do anything.’ Focusing on this – specifically on the risk side of the coin – may help an investor or analyst get a more well-rounded picture on the markets that they’re focusing on. One of the most attractive parts of a global macro focus or strategy is the fact that this focuses intently on systematic risk, which is a rather unavoidable factor that will likely bring some element of impact to most trading strategies in one way or the other. But, this can also take on policy parameters by looking at the political landscapes and potential shifts in these economies in the effort of projecting what may happen in the future to other related economies. This can include concentrating on fundamental data points such as GDP or CPI, or perhaps even rate policy at the representative Central Bank. Global macro analysis will often focus on the macroeconomic outlay in these key economic areas in the effort of devising strategy and creating projections. A good example of this is the relationship between Canada, Mexico and the United States, which will be expanded on in deeper detail later in this sub-module. This will often be extrapolated down into smaller pockets of the global economy, looking at regional and national relationships and how those might impact each other. Global macro is an investment or analysis approach that focuses on macroeconomics in the global economy. And this is what can make the prospect of Global Macro investing difficult, especially for new traders or analysts. But, it’d be incorrect to cast a systematic approach towards such an initiative because this would fail to account for the nuance of each individual region or society the very same factors that make that part of the world unique and its own. It also opens up considerably more options for traders, investors and money managers, as there’s now a litany of additional growth opportunities available. And for the developed world, this offered the potential for growth as those economies further evolved away from industrialization and towards services as emerging markets took on industrialization in the effort of growth. This has enabled the world to lift more people out of poverty than ever before, driving education and healthcare into areas of the world that haven’t enjoyed those types of advances in the past. And while this comes with both positive and negative consequences, for a long time globalization was largely considered as a positive economic trend with symbiotic benefits. The World is more connected today than ever before.