By Robert T. McGee
Absolutely the and relative functionality of varied asset sessions is systematically with regards to macroeconomic traits. during this new e-book, Robert McGee presents an intensive consultant to every degree of the company cycle and analyzes the funding implications utilizing real-world examples linking fiscal dynamics to funding effects.
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Extra info for Applied Financial Macroeconomics and Investment Strategy: A Practitioner’s Guide to Tactical Asset Allocation
A willingness to loosen the purse strings and spring for a new car, boat, or appliance is much greater when the economy is humming. Volatility in household durables spending is consequentially much greater than spending on everyday necessities. That’s why consumer staple stocks are considered defensive plays for bad times, while consumer discretionary companies thrive in better economic environments. The financial crisis of 2008–2009 was particularly tough on consumer purchases of motor vehicles, which fell by about half from their average level of the 1995–2007 period as the financial markets seized up.
In fact, there is also a case to be made that the policy safety net has increased moral hazard in a way that allows reckless behavior to accumulate over cycles rather than purging it in each cycle as was the case in “the good old days” of more frequent recessions and depressions. While there are lots of reasons business cycles vary over time, there are also features that they have in common over time. The gestalt selforganizing principle helps us understand the “sameness” dynamic. Essentially, a growing economy starts off with early adopters (new business models, new technology applications, for example) and restructured, more efficient operations in existing businesses buying into the notion that business conditions are turning up (usually helped by more stimulative interest rates as the Fed cuts short-term lending rates in recessions to help spur borrowing and economic growth) and progresses to the point where growth has created certain excesses that need to be corrected by a slowdown.
McGee 2015 16 Applied Financial Macroeconomics and Investment Strategy Fed Chairman Ben Bernanke’s unorthodox response to the 2008–2009 financial crisis owed much to the largely empirical analysis done by economists like Milton Friedman, who focused on the lessons from the Great Depression of the 1930s. M. Keynes, also weighs heavily in the best thinking synthesis of how policy can preempt depressions. In a nutshell, the modern synthesis of appropriate economic policy boils down to avoiding deflation by keeping long-term inflation expectations stable at a slightly positive level.