Description
‘At a time when global macro has rarely been more relevant, this book captures what drives macro trading: the interaction of policy, markets, and human behavior. It combines analytical depth with real world insight, making it essential reading for traders, investors and anyone with an interest in global markets.’
Andrew Morton, Global Head of Markets, Citi
‘History remains our most reliable guide to markets. Dirk and Alex examine the most durable macro relationships with empirical rigor—a must-read for any macro investor.’
Paul Tudor Jones II, CIO and Founder, Tudor Investment Corp
‘Even seasoned professionals will find this book valuable. A rigorous, well researched work from one of the industry’s thought leaders. An excellent and practical contribution, firmly grounded in data.’
Ben Melkman, Managing Deputy CIO at Bridgewater Associates
Discover opportunities in macro trading as global market volatility increases
In Trading Global Macro Markets, accomplished global macro veterans Dirk Willer and Alex Saunders deliver a complete and incisive guide to navigating global macroeconomic trends as the low volatility world of quantitative easing gives way to the post-pandemic world of increased interest rates and macro volatility. The authors offer coverage of every major asset class, from government debt and credit to equity, commodity, and foreign exchange markets, along with back-tested frameworks going back over two decades and more that illustrate how to trade each class and how to make cross-asset trading decisions.
This fully validated roadmap to global macro trading is a thoroughly researched handbook filled with use-cases, charts, examples, and tools. It avoids overly complex mathematics in favor of concise explanations and case studies wherever possible, ensuring it remains accessible to practitioners and traders from a wide variety of backgrounds.
You'll also find:
- Strategies for trading the business cycle and macroeconomic events, like economic data releases, monetary policy meetings, elections, and geopolitical flashpoints
- Techniques for tactical asset allocation
- Ways to choose between asset classes and discussions of trades that illustrate the concepts explored in the book
Ideal for global macro buy-side and sell-side professionals, asset allocators, market researchers, academics, regulators, and policymakers, Trading Global Macro Markets will prove invaluable to all finance practitioners interested in the interplay between macroeconomics and the markets.
Table of Contents
CHAPTER 1 Introduction 1
1.1 Acknowledgments 4
CHAPTER 2 Global Macro Rules 7
2.1 Long-Term Performance of Macro Funds is Strong 7
2.2 How Do Macro Funds Make Money? 8
2.3 A Bright Future 1: Equities are Expensive 9
2.4 A Bright Future 2: Volatility Rises During QT 10
2.5 A Bright Future 3: Rates Bets with Highest Sharpe Ratio and More Profitable with Rates Substantially Above Zero 11
2.6 A Bright Future 4: Performance Cushion from Non-zero SOFR 11
2.7 A Note on Process and Does History Really Rhyme? 13
2.8 What is Good Performance? 14
2.9 Summary 15
CHAPTER 3 It's the Business Cycle, Stupid 17
3.1 From Boom to Bust and Back 17
3.2 What is Leading—Fundamentally? 19
3.3 But Who is Really in Front? 21
3.4 Crystal Balls or False Prophets: How Useful are the Leading Indicators? 26
3.5 Trading in the Rearview Mirror 29
3.6 How to Trade a US Recession 33
3.7 Pricing Price Changes 40
3.8 The Third Mandate 41
3.9 Rhyming it Does, but not Repeating 45
3.10 Born in the USA 47
3.11 From China with Love 48
3.12 Trailing the Tide: Europe usually a Follower 49
3.13 India as the Next China? 53
3.14 Summary 56
CHAPTER 4 Temporary Turmoil: Markets and (Geo) Politics 57
4.1 Geopolitical Risk the Bad Old Days 57
4.2 From Conflict to Barrel 60
4.2.1 Hedging Conflict 65
4.3 Warfare by Tariff 66
4.4 Volatility at the Ballot Box 67
4.5 Summary 77
CHAPTER 5 How to Trade Rates: A Framework 79
5.1 A Treasure to Behold 79
5.2 It's the Fed, Stupid 82
5.3 How to Trade a Hiking Cycle 87
5.4 Hikes are Oily 91
5.5 The Wisdom of Equity Markets 93
5.6 How to Trade an Easing Cycle 94
5.7 Trading the Curve 104
5.8 The Weight of Supply 107
5.9 Valuation—Use Sparingly 111
5.10 Trend Following—Only in the Short Term 112
5.11 TIPS—The True Treasure 113
5.12 When Rates Markets Roar 117
5.13 Summary 118
CHAPTER 6 How to Trade Rates: The Tactics 121
6.1 The Anatomy of a Rates Sell-off 121
6.2 The Wisdom of the FOMC 126
6.3 Trading the Nonfarm Catalyst (NFC) 128
6.4 CESI—a Busy Man's Guide to the Economy 130
6.5 When Safety Backfires 132
6.6 A Season for Bonds? 133
6.7 Summary 134
CHAPTER 7 How to Trade Rates: Globalizing 135
7.1 Can Global Fixed-Income Markets Diverge from the Fed? 135
7.2 Bonding with Bunds 140
7.3 Gilded Gilts? 142
7.4 At the Periphery 146
7.5 Is Japan Different? 149
7.6 Is China Different? 152
7.7 EM Rates—Wagged by the Global Macro Dog 153
7.8 One-way or Two-way Traffic? 154
7.9 Summary 157
CHAPTER 8 How to Trade Equities: A Framework 159
8.1 Equities in the Big Picture: The Only Way is Up 159
8.2 Equities and the Business Cycle 161
8.3 Equities and the Fed 163
8.4 Equities and Earnings 171
8.5 Equities and Liquidity 179
8.6 Equities and Bubbles 180
8.7 Valuation Not Very Valuable 189
8.8 Winners Keep Winning 191
8.9 Small, Not Often Beautiful 193
8.10 Summary 195
CHAPTER 9 How to Trade Equities: The Tactics 197
9.1 Spotting the Peaks 197
9.2 Bottom Watching 198
9.3 Positioning Pain Trades 205
9.4 Insiders have Insight 205
9.5 Buybacks—Don't Have Your Back 208
9.6 There is a Season for it 209
9.7 Of Good News Bears—and Vice Versa 213
9.8 The FOMC Effect 217
9.9 Summary 218
CHAPTER 10 How to Trade Equities: Globalizing 221
10.1 The Cycle goes Global 221
10.2 Global Equities meet FX 225
10.3 Trading Tokyo 226
10.4 Trading Frankfurt 228
10.5 Trading London 229
10.6 Trading Shanghai 232
10.7 Trading the Rest of EM 240
10.8 Tactical Considerations 243
10.9 Summary 245
CHAPTER 11 How to Trade Credit 247
11.1 Credit in the Big Picture 247
11.2 Defaults in Motion 250
11.3 No Credit to the Fed 252
11.4 (Dis)crediting Value 254
11.5 Carrying Credit 256
11.6 Junk or Quality? 257
11.7 Rising Angels and Falling Stars 257
11.8 The Supply Fallacy 259
11.9 The Credit Canary 260
11.10 The Loans Logic 265
11.11 Choosing Sides in Credit: EM Versus US 266
11.12 Limited Foreign Supply, Unlimited Demand? 267
11.13 Summary 268
CHAPTER 12 How to Trade FX: The Framework 269
12.1 USD Smile, Smirk, or Cloud? 269
12.2 The USD and the Business Cycle 272
12.3 A Composite Model 276
12.4 The USD in Bubbly Times 277
12.5 JPY is Special 278
12.6 Factors for FX 282
12.7 Living Off Carry 283
12.8 Value Works Too 288
12.9 Riding the Trend 289
12.10 Hide in Surprise 291
12.11 Summary 292
CHAPTER 13 How to Trade FX: The Tactics 293
13.1 The Fed and the USD 293
13.2 Intervention—Burning Reserves, Buying Time 295
13.3 Go with the Flow or Against? Do Both! 299
13.4 Technicals: Intraday Reversals 300
13.5 No Basis for the Basis 301
13.6 Summary 302
CHAPTER 14 How to Trade Commodities 303
14.1 Commodities: They Have Their Moments 303
14.2 Commodities and the Business Cycle 310
14.3 Riding Commodity Trends 313
14.4 Carry in the Ground 313
14.5 Bottom's Up 315
14.6 Ace of Base 318
14.7 Gold: A 3,000-year-old Bubble that Refuses to Burst? 323
14.8 How to Trade with Energy 329
14.9 How to Trade OPEC Meetings 332
14.10 Positioned for Failure 335
14.11 Summary 335
CHAPTER 15 How to Allocate 337
15.1 A Regime Investing Approach 337
15.2 How to Protect Against Stagflation 342
15.3 Strategic Asset Allocation for Regime Agnostics 346
15.4 The Choice of Equity Versus Credit Risk 347
15.5 The Choice of Government Bonds Versus Equities 348
15.6 Don't Risk Your Budget, Budget Your Risk 352
15.7 Tactical, Tactical, Asset Allocation 354
15.8 Summary 356
CHAPTER 16 Non Traditional Assets: Private Assets and Crypto 357
16.1 Macro and Crypto—A Match Made in Heaven 357
16.2 How Much to Allocate to Bitcoin? 360
16.3 Following the Crypto Trend 361
16.4 Publicizing Private Assets 362
16.5 A smooth ride? 363
16.6 Infrastructure (and Real Estate) for Stagflation 365
16.7 All Managers are Not Created Equal 366
16.8 Summary 368
Bibliography 369
Index 375
