Editor's Note: Below is a chart and brief excerpt from today's Early Look written by Hedgeye Senior Macro Analyst Darius Dale. Click here to subscribe.
The art of formulating top-down views leaves a lot more room for dispersion of thought. Take the US economy for example. This morning, I’ve already come across three characterizations of the US economy in the financial media – i.e. “returning to ‘trend’ growth”; “in a good place” (read: Goldilocks), and “at a ‘delicate moment’ [in time]”.
Complicating matters, each of the aforementioned phrases could be taken to mean something entirely different to two different investors. Worse, market participants generally apply far less analytical rigor to the process by which they formulate Macro opinions. Indeed, the signal-to-noise ratio per dollar traded in the equity and credit markets is far lower for trades motivated by top-down factors (e.g. “trade wars”, “China stimulus”) than they are by bottom-up events (e.g. earnings, M&A).
Said simply, it blows my mind to think about how much capital changes hands, daily, as a function of what most of us would consider to be poorly researched [Macro] opinions.