Financial market macro-fundamentals are the foundation of trading and investment literacy. Those who have the knowledge and can properly interpret macro events are head and shoulders above the typical retail trader. If one cannot understand basic macro economic fundamentals and intermarket relationships, they should not be trading, let alone be offering investment advice. Unfortunately, there are many individuals in finance who are in this position. They often offer their clients advice with nothing other than dated and sell-side biased information from their respective research departments. This course aims to remedy that situation by providing traders, investors and advisers of all levels with a solid understanding of how monetary policy and intermarket relationships affects financial asset pricing and trends.
Financial markets often behave in ways which seem irrational. This perception is often based on incomplete knowledge or erroneous thinking. The fact is, there is rarely anything ‘textbook’ about financial market reactions. There are always a variety of reasons why markets react as they do to financial news events. Markets are extremely dynamic. If, for example, a certain market correlation was pertinent last month, it may not be so today. Understanding how and why these shifts in sentiment occur, is one’s first indication that they are becoming proficient. This course will bring you to that level and beyond.
The transformation from financial illiteracy to proficiency and eventual mastery does not happen over days or weeks. One cannot ‘cram’ from a textbook to learn the macro economic fundamentals. Such deep understanding takes several months of mentored instruction. For this reason, we have designed this course to offer students of all levels the opportunity to reach mastery in a gradual, passive way. Students will also have access to several instructor/traders, most of whom have over a quarter century of professional trading experience for banks and proprietary trading rooms.
Key ‘takeaways’ and topics to be covered in this course
- Learn how to profit from Central Bank Policy statements and economic releases;
- Recognize opportunities in foreign exchange markets as you come to understand historical currency relationships.
- Profit from long term macro economic trends as you learn how commodity trends, business cycles and monetary policies interact.
- Gain a strong understanding of financial media reports and learn to recognize critical news from media noise.
- Understand how institutional traders evaluate opportunity and when and how they make their presence known in the market.
- Learn which forces are likely to lead to financial crises and how you can prepare and profit from their inevitable recurrence.
- Understand the role of a variety of key income instruments and how they affect global capital flows.
Module 1. Global Economic Indicators and News Releases:
- Non-farm payrolls, CPI and other indicators; their influence on key trading products.
- How to prepare for and react to economic news releases and other financial market events.
- Applying statistics, ‘expected versus actual’.
- Understanding how institutional traders react to news releases.
Module 2. Central Banks and Monetary policy (part 1)
- Interpreting ‘Fedspeak’: policy meetings, parsing FOMC statements.
- Focus on US, ECB, Japan, Canada, Australia
Module 3. Central Banks and Monetary policy (part 2)
- Understanding how Central Banks operate,
- Understand monetary policy and fiscal policy as it applies to current financial markets: stocks, bonds, commodities.
Module 4. Economic Crises and Geopolitical events
- A survey of modern financial crises, black swan events and how they developed.
- Understand the effects of geopolitical events in financial markets and how to anticipate them.
Module 5. Intermarket Correlations (part 1)
- Why Correlations are Important to Study
- Understand why and when commodities, currencies and financial products track each other, de-couple and converge.
- Inter-markets and the Business / Investment cycle
- Risk-on and Risk-off Correlations
Module 6. Intermarket Correlations (part 2)
- The Influence of the Yield Curve on global capital markets
- Intuiting Global Capital Flows
- Key Intermarket Relationships
- Focus on Gold, Oil and other key commodities.
Module 7. Intermarket Correlations (part 3)
- The Influence of Currency Markets on investment trends
- The “carry trade” explained
- Currency market correlations and statistical arbitrage opportunities
Module 8. Fixed Income Markets / Research Methods and Resources
- Understanding fixed income products, what they are, how they function and their role in the economy.
- The yield curve: understand steepening, flattening and why and when it occurs in the short and long term.
- Forecasting economic trends from the credit markets
- Learn how and where to source critical macro economic fundamental data
Course length: 8 weeks. Total class time: 12 hours (1.5 hrs x 8 classes) + unlimited access to News vs. Noise trader chat room.
- Study modules accessible to students via a web-based learning management system and taught online via Skype.
- Weekly classes focus on applying the week’s homework lessons in the context of recent macro news events.
- Home-study modules are straightforward, contextualized and simple to understand
- Classes are in the form of Q&A and homework.
- Student participation such as Q&A, trade review and critique is encouraged since active participation helps ensure effective reinforcement of course material.
- The course includes continual assessment and is followed by an exam (optional) to ensure each student thoroughly understands the application of macro economic fundamental principles.
- Continual learning through our trader chat room where students can pose questions during the term of the course.
- Read weekly preparatory material, (course modules and recent articles) and answer questions posted by instructor.
- Weekly Skype discussions about global macro events: what happened and why. Theory is put into context. 1.5 hrs per week.
- Journal /project which students develop throughout the term. Students will be given one or two questions each week and they need to explain the rationale of a trade using what they have learned to date.
Grading: 50% based on part 3. 50% based on a comprehensive, 3-hour exam (80 questions)
Without Exam – With Exam
What comes next?
As a graduate of the Financial Market Macro-fundamentals course you now have a proficient understanding of how global financial markets operate. You should be able to make confident trading and investment decisions based on your knowledge of economic macro-fundamentals and intermarket relationships. You should be able to make objective decisions about the course of interest rates and understand the rationale of Central Bank policies. Moreover, you will be able to think critically about what you hear on the financial media and recognize the facts from the ‘noise’ of sell-side market analysts.
If you are an investment adviser or any kind, congratulations for having taken this course. The knowledge you have gained will allow you to earn the confidence and respect of your most informed and wealthiest clients. If you are a trader and have not taken any other course from OFA, we would highly recommend doing so. Financial market macro-fundamentals are only one part of what is required to be a complete trader.