Trying to profit from timing in any business decision is, admittedly a lucky man’s journey, yet macro considerations are a core to investing or to predict future events. So, planning and executive teams conduct a range or analyses, including environmental - which we call macro trends - meaning outside of your firm and its market to identify future behaviors.
As Warren Buffett says macro is important but impossible to really ‘know’, so in order to benefit from macro financial trends, it is important to focus on the foundation and core facts for the businesses you own.
Here are some recommendations on how to identify and use macro trends to your advantage:
- Educate yourself on macro factors. These include (regional and global) economic growth, where you and other companies are in the business cycle, short & long term credit cycles, interest rates, outlook on inflation, impact of major currency trends, G4 economies and monetary policy, central bank interventions, and fiscal policy.
If you focus on Fintech and emerging technologies, pay special attention to key trends, market drivers, case studies, standardization and SEC guidelines/rulings, regulatory landscape, deployment models, case studies, roadmaps, value chain and opportunities from this year to 2025, for example.
Make sure you understand the major vendor/key players in the market and asses the markets according to product, service and application type
- Understand the influence of your target market. In the case of Fintech, for example, acquire a comprehensive or global understanding of opportunities and risk in market.
- Be aware of recent innovations and major events
- Read detailed studies of business strategies for expansion and growth amongst the leading players (short and longer term)
- Understand major market drivers, challenges and even micro markets
- Be privy to a company’s reputation
It’s important to incorporate a macro overlay into your investing strategy, which simply means finding winning companies at reasonable valuations.
While not all of the above factors may have a direct impact on the business prospects of your portfolio in the short term, collectively macro factors will impact corporate earnings, asset prices and market multiples in the longer term.
It’s important to understand how much you will allocate to cash and how bearish you want to get will depend on whether you can find companies at reasonable valuations and depends on what your macro risk parameters are.
In summary, these are the market factors you need to pay special attention to:
- Core Strategic developments: These include R & D, new product launch, agreements, partnerships M&As. joint ventures, global/regional growth of leading leading players operating in the market.
- Fundamental Market Features: Including revenue, price, capacity, utilization rate, production, consumption, import/export, supply & demand, cost, market share, and gross margin. Also make sure you understand the latest dynamics, including trends, market segments and sub segments.
- Analytical Tools: Study the data around the core industry players and their scope in the market by using analytical tools.
- Read Industry Specific Market Reports: The goal is to read market research to understand economic scenarios and market development rate and development, SWOT analysis, and so on.
The ultimate question is, should you move early or wait in order to truly benefit From Macro Financial Trends?
You should in fact prepare for a decade long perspective as you develop your strategy (as opposed to focusing on the average three-year horizon).
You need to understand all of the possible disruptions to banking institutions, what the effect would be on profits, the sources of advantage, and what the banks can do — or are doing — about those disruptions.
Study, analyze, communicate with your strategy and executive team, then commit to a decision.
Brent Traidman is the CRO of leading crypto wallet, BRD. He has over 15 years of experience leading high impact growth software companies, of which many have had successful exits.
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