What is Macro?

Macro — short for macroeconomics — is the big picture of the economy: growth, inflation, employment, interest rates, government spending and the policy of central banks such as the Federal Reserve.

Macro matters for investors because it sets the backdrop for every asset class. Rising interest rates make bonds cheaper and future profits less valuable; strong growth supports company earnings and commodity demand; a flood of liquidity lifts almost everything.

Macro forecasting is notoriously hard. Trend-following approaches use price as a summary of what the market collectively believes about the macro picture — instead of trying to forecast it.

By Dr. Harry Hamann