TrackMacro™: The World Economy in a One-shot View

TrackMacro App on desktop
At any one time, countries around the world will follow different monetary policies and fiscal policies. Their equity and currency markets may be more or less undervalued or overvalued. Their real rates may be too low, too high or broadly right. Changes in global trade, or in commodity prices (especially oil) may have positive or negative effects… In short, an almost limitless number of variables can impact the outlook for any given economy, and its financial markets.

The aim of the Gavekal TrackMacro application is to cut through the noise and to deliver an easy to digest signal, in real time, on the world’s 40 largest economies, and their financial markets.

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TrackMacro is a software application which allows investors to:

  • Get a one-shot view on the world’s best asset classes given the financial environment.
  • Rapidly view the risk-profile of the 40 largest economies in the world and their stock-markets.
  • Identify the investment environment currently prevailing in the world’s 40 largest economies.
  • Quickly identify the best-remunerating currencies, equity markets and bond markets.
  • Build efficient and optimized portfolios within user-defined constraints.
  • Track perfomance.

The Theoretical Underpinnings of the TrackMacro Software System

The single most important thing an investor can do is to identify and define the current investment environment. Simply put, some environments are propitious to risk taking, while others are not. This is where TrackMacro comes in. And to answer this all-important question, we, theoretically speaking, rest on the shoulders of giants.

Phase 1

Financial Environment

Phase 2

Competition Across Countries

Phase 3

Global Portfolio Grid

Financial Environment

Keynes & Wicksell

Keynes or Wicksell?

Are we in an environment where interest rates favour the rentier (we call this a Wicksellian period after Swedish economist Knut Wicksell)? Or are we in an environment where the central banks attempts to ‘euthanize’ the rentier through inordinately low interest rates (we call this a Keynesian period after Lord Keynes).
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Smith & Malthus

Smith or Malthus?

Is the economy developing some obvious shortages (we call such periods “Mathusian”), or is the system efficient enough to ensure a proper allocation of resources (we call such periods Smithian, after Adam Smith).
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Markowitz & Mandelbrot

Markowitz or Mandelbrot?

Are financial markets behaving in a broadly rational manner (such as described by Markowitz)? Or, instead, are financial markets dislocated, with correlations going through the roof (as described by Mandelbrot?)
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Competition Across Countries

Having established the answers to the above, all-important questions, TrackMacro analyses the relative attractiveness of regions and countries in their currency, bond, and equity markets. From a financial standpoint, an economic zone competes with rivals on two fronts:
1. The Monetary Front: It competes to safeguard and attract excess savings in its denominated currency.
2. The Economic Front: It competes to deploy the attracted capital in local risk assets successfully.
In other words, economic zones favour inflows of capital in their own currency, whether it be in cash, bonds or equities. In short, they compete to attract the largest amount of capital. However, to succeed, they must also please investors.
From an investor’s standpoint, the attractiveness of an economic zone resides in the proposed assets’ remunerations.
TrackMacro focuses on the leaders, or simply avoids the losers.

Global Portfolio Grid

Phase III consolidates all the information provided by the previous analysis:
Which regions, currencies, and countries provide the best remuneration on cash deposit, bonds, and equity risk premia?
Do monetary policies favor the main fiat currencies or gold and other fixed income markets?
Within the best-remunerating economic zones, which ones do not show any signs of economic or behavioral stress?
Given the risk constraints defined by the user, what is then the optimized portfolio?
TrackMacro provides automated monthly grids on such portfolios,
whether the user focuses on fixed-income only, equity only, or balanced portfolios.
TrackMacro then updates monthly the performance of the strategy and provides back-tests over decades of historical data
MacBook Screen

User-defined Constraints and Views

TrackMacro is extremely flexible to constraint its portfolio conclusions within user-defined risk levels and confidence levels in TrackMacro readings:

  • Maximum equity allocation
  • Minimum equity allocation
  • Equity benchmark by country
  • Government bond benchmark by country
  • Acceptable levels of bonds and equities' concentration
  • Maximum currency risk
  • Trust level in TrackMacro models
The ‘Trust’ parameter simply means that TrackMacro is not a ‘black-box’
but an analytical tool which remains under the control of the user
Black Box