Turning Signals into Actionable Insight
Our macro strategy team draws from a wealth of experience in leading global investment institutions, top hedge funds, pension funds and endowments, where they practiced in the trenches of financial research and portfolio management. RGE strategists build on the work of the macroeconomic research team and incorporate market dynamics, answering crucial questions and generating actionable investment recommendations. Roubini Market Strategy focuses on several questions:
- Are macro imbalances, geopolitical risks, structural and secular changes causing bubbles or busts, and are these risks priced in?
- How can actions by policy makers and multilaterals affect these outcomes? What are the right policies, the wrong ones and the most likely ones?
- Is this time different? Understanding the answer requires a deep knowledge of Crisis Economics, from utter failures and collapses to resolutions and rebounds.
Depth and Rigor: RGE's strategists complement the insights of the RGE economists by projecting their analysis and forecasts onto each asset class we cover. They assess whether expectations and their associated risks are priced in, with an emphasis on unsustainable imbalances and structural breaks outside of consensus and conventional wisdom.
Top-Down, Disciplined Investment Approach: Our expertise in each individual asset class means we are aware of the fundamental, bottom-up drivers and technical factors as well as how those inputs are affected by macroeconomic changes. RGE strategists develop frameworks to measure what is priced in, what target levels to expect under our base-case scenarios and where trades based on that analysis offer the best reward-to-risk ratio. These recommendations are explained transparently, and performance is tracked until a trade reaches its target or is exited. We won’t be right 100% of the time, but we have the macro "edge" and the discipline to put on trades only where conviction is high and the pricing is right.
Cross-Team Dialogue: Our strategists form their views as a team, exchanging ideas and challenging correlations across regions and asset classes. The result is a holistic asset allocation product informed by the input of our macro economists. We reject dogma and explore a range of probabilities and paths, mapping those economic conclusions with a variety of models to evaluate how asset prices would behave under each scenario and what current price would fairly reflect that probability-weighted "expected value."
White Swans: RGE is not afraid to consider regime breakdowns, and our extensive experience with emerging markets tempers our reliance on quantitative methods as systemic breakdowns defy conventional analysis. They are subject to multiple equilibria and overshooting, and they may cause political repercussions and structural shifts, all of which are ill-suited to backward-looking, econometric approaches. At RGE, we view such events as part of the global economy, not an exception to normality. Crises, as Nouriel Roubini has said, "are white swans, not black." As consensus lapses back toward cheerleading mode, RGE stays independent and unbiased.
Quant Unbound: Modern Portfolio Theory and the Capital Asset Pricing Model are not useless, but incomplete, stylized models lack any value during periods of stress or structural change. The Great Recession has definitively proved the need to grapple with crises before they start. RGE views these dangers as identifiable and even manageable. From a strategy point of view, they are sources of investment opportunity, and even those not focused on macro investing now know the price of ignoring their "macro blind spot."