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Over the last thirty years global macro investors have been some of the most consistent and successful investors in the world. I fact as a group they have the highest Sharpe ratio of any trading style in most hedge fund databases. In this article we will go over a few of the different reasons why this is.
The global macro mandate is simple, make money. You can trade the SP500, you can trade the Thai Baht, you can trade pork bellies. But you must make money. Global macro is the most opportunistic and truly capitalistic trading style there is. You can trade anything anywhere as long as you can make money. So instead of focusing on one asset class above all else macro traders are able to go where the money is and focus on the best opportunities anywhere and not just in the regular playground.
Another difference between global macro traders and regular investors is that successful global macro traders don't just talk about risk management, they practice it. A lot of this probably comes from the fact that a lot of well known global macro traders came from the futures pits where the inherent leverage demands respect or it takes all your money away. Risk management is the key to successful trading. Anyone that claims to have "the secret" to trading is either a liar or is selling you risk management as it is the true key to success.
All that aside one of the best reasons to look global and to think top down, the very definition of global macro, is so that when you formulate an investment theme you can trade all the way through it. For instance if you put together a potential scenario that has commodities doing one thing, then it bleeds over into the economy and makes bonds do something, all the while having some stocks participate, etc. then wouldn't you want to be part of the whole process? After all you just spent a bunch of time figuring out the whole cycle.
So instead of only trading part of the theme, wouldn't it be nice to be there for the whole thing? You can trade through the whole cycle and likely make a lot more money then just looking for the next idea.
If you are a global macro trader then you will be able to take advantage of the entire thing. You can go long emerging market stocks, later go long oil as the demand picks up, then go short bonds as inflation picks up, then watch as it all gets over heated and then go long bonds, short commodities, and short the stocks as it all unwinds. That is a lot more profitable then just buying the stocks or selling some bonds.
Why traders do the alternative and just stick to their traditional space has never made sense to us. Global macro investors always see where they can be involved and where is the best risk reward.
The benefits and profitability of thematic trading is very strong. Why traders and investors leave half the money on the table is beyond us and we would encourage you to look at what you can do, at what you have researched, and where else along the curve can you trade it and profit from it.
The global macro mandate is simple, make money. You can trade the SP500, you can trade the Thai Baht, you can trade pork bellies. But you must make money. Global macro is the most opportunistic and truly capitalistic trading style there is. You can trade anything anywhere as long as you can make money. So instead of focusing on one asset class above all else macro traders are able to go where the money is and focus on the best opportunities anywhere and not just in the regular playground.
Another difference between global macro traders and regular investors is that successful global macro traders don't just talk about risk management, they practice it. A lot of this probably comes from the fact that a lot of well known global macro traders came from the futures pits where the inherent leverage demands respect or it takes all your money away. Risk management is the key to successful trading. Anyone that claims to have "the secret" to trading is either a liar or is selling you risk management as it is the true key to success.
All that aside one of the best reasons to look global and to think top down, the very definition of global macro, is so that when you formulate an investment theme you can trade all the way through it. For instance if you put together a potential scenario that has commodities doing one thing, then it bleeds over into the economy and makes bonds do something, all the while having some stocks participate, etc. then wouldn't you want to be part of the whole process? After all you just spent a bunch of time figuring out the whole cycle.
So instead of only trading part of the theme, wouldn't it be nice to be there for the whole thing? You can trade through the whole cycle and likely make a lot more money then just looking for the next idea.
If you are a global macro trader then you will be able to take advantage of the entire thing. You can go long emerging market stocks, later go long oil as the demand picks up, then go short bonds as inflation picks up, then watch as it all gets over heated and then go long bonds, short commodities, and short the stocks as it all unwinds. That is a lot more profitable then just buying the stocks or selling some bonds.
Why traders do the alternative and just stick to their traditional space has never made sense to us. Global macro investors always see where they can be involved and where is the best risk reward.
The benefits and profitability of thematic trading is very strong. Why traders and investors leave half the money on the table is beyond us and we would encourage you to look at what you can do, at what you have researched, and where else along the curve can you trade it and profit from it.
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>global macro trading advisory publication with frequent intra-week updates for time-critical
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