Macro Trading Versus The SP500

Macro Trading has many benefits versus equities. As mentioned before a global macro trader can trade in any asset class, in any country, using any strategy. So what are the benefits of these freedoms? Well there are many but here we will focus on two of them. First is that using multiple asset classes, countries, and strategies we are able to get a more consistent stream of returns. When one asset class zigs one is zagging. If we blend them together well we can end up with a very steady stream of returns.

This chart shows $1000 invested in the Barclays Group Global Macro Index versus $1000 invested in the SP500 from the beginning of 1997 to the end of September 2007.

The other major benefit we will discuss here is that our risk profile is much better. The worst drawdown in the SP500 since 1997 was -46.28%. Now compare that to the Barclays Group Global Macro Index where your worst drawdown was only -5.22%.

Charts showing drawdowns for Macro Index and SP500 1997-September 2007

You can see that there is more than just a slight difference. Where the SP500 is more or less at breakeven for the past seven years the Macro Index has never taken longer than eight months to make a new high.

If you are only trading or investing in one asset class or if you are only trading in the United States please look at some of the benefits of adding some asset classes, countries, and trading strategies to your portfolio. Long term we think you will be happy you did.

Happy Trading,

The Macro Trader

What is Macro Trading?

At we view macro trading as a process of finding the best risk to reward situations on the planet. Instead of being put into a style box we are free to go to where the money is. Many money managers whether they run a mutual fund, hedge fund, are a proprietary trader, or even a retail investor box themselves into a corner by only looking at one or to asset classes and even than only looking at a segment of that.

For instance look at the Mutual Fund industry. Most funds have such a strict mandate that they can’t invest out of the United States and many even have limitations on the capitalization of the stocks they can buy. And then on top of all that most are not allowed to short or use derivatives. While doing all of this may help Morningstar put you in a style box we here at think that it limits yourself to potential opportunities and forces you to allocate your money to less than optimal risk to reward opportunities.

So in conclusion to us macro trading is being able to go anywhere in the world, trade any instrument, using any strategy. The objective of a global macro trader is to find the absolute best risk to reward situations on the globe.

Happy Trading,

The Macro Trader