What exactly are the macro markets? The term macro markets or global macro markets basically just refers to the overall benchmark markets that we look at on a daily basis, it refers to all the major currencies, the major and commodities, the major fixed income markets, the major equities, et cetera. And it usually refers to, you know, the overall macroeconomic view on a global scale and the various global macros, macro markets that are connected to that.
So when we look at something like a currency, let’s say we are looking at the Euro. We don’t just look at their currency at face value, right? We look at it from a macroeconomic view by analyzing it from the top-down, we start with monetary policy, then we go to fiscal policy, going into political things, geopolitical considerations et cetera. And, of course, we don’t stop there because we’re not only, we’re not only looking at the Euro, we’re looking at something to trade against it. So we’re looking not only looking at the Euro as from an economic point of view, but we also look at something like the dollar or the US economy to trade against it, or the Australian economy to trade against it. So we look at all of those factors for both of them. So that would mean you know, doing macroeconomic analysis for both economies to try and establish whether there is scope for one currency to outperform the other. But of course, we don’t stop there for both these countries, both of them will also have equity markets of their own, they will also have bond markets of their own. And if we follow the same process that we follow for establishing the value of the currencies based on how the economies are doing, we should also get an idea of where the overall market should be trading as well, where the bond should be trading, where the equity should be trading et cetera. And of course, we don’t stop there.
There’s also a commodity market. So depending on the type of economy that you’re looking at, if you’re looking at an economy that has a large dependency on a particular commodity, that’ll also need to be part of that analysis as well. And then, of course, you also need to look at everything through the lens of a global perspective as well, which means looking at the global economy as a whole. That means looking at major economies that normally drive the world markets, that’ll be taking a particular view of things like China, looking at things like the US and their current economic stances, that will affect the rest of the world, due to the size of world GDP. Now from a more practical point of view, when we say macro markets, we mean looking at everything we look at on a daily basis. So we will look at the macro, the main FX or the main currencies for the day, so we’ll look at the AUD, the Eure, the Pound, the Kiwi, the Yen, the Franc, the Canadian dollar and how that is tracking versus the US dollar. We will also look at the major commodity markets, looking at gold, looking at copper, looking at oil prices. In terms of equities, we will look at the major indexes. So we will look at the S&P, the Dow, the NASDAQ, the DAX, the Euro stocks, ASX, the FTSE, the VIX, obviously volatility, they will look at bond markets as well. And what you can do a lot of the trading desk out there, for this reason, they’ll have a screen setup that only looks at the major macro markets or the benchmarks for the major macro markets and that’ll mean having a screen up that’ll look at something like the euro dollar, you look at USD notes, you look at WTI, you’ll have VIX. You’ll have the S&P up there, maybe the NASDAQ, gold, you’ll have the dollar index. So you’re tracking all of these major global macro markets and seeing how all of them are doing across the board.
So that is what we mean when we use the phrase macro mark, or global macro markets really just basically means all. We’re taking everything into account not only the economy but also the major benchmark for each of these asset classes that move the market on a daily basis.