At Beck Capital Management (BCM), we believe understanding macroeconomic indicators is essential for creating a responsive investment strategy that can withstand various market conditions. We frequently use a “30,000-foot view” when assessing the global economy and its potential impact on investment portfolios. Why do we believe this is important?
Because the big picture matters. As we like to say: “Money always flows to where it is treated best.” That’s why at BCM, we analyze various macroeconomic factors, from international monetary policies to demographic trends, to determine where and how to invest. We like to invest where money is going, not where it has already been.
In this blog, we’ll explain how our team of Austin investment advisors analyzes global economic indicators, how the results impact our investment decisions, and how this ultimately impacts the portfolios we manage for our clients. Understanding these factors will give you better insight into how your portfolio is simultaneously built to seek growth and manage unexpected market fluctuations.
What is Macroeconomic Analysis?
In simple terms, macroeconomic analysis is looking at the big picture of an economy to understand how a variety of factors may affect its overall performance. Instead of focusing on just one person or one business, it looks at the economy as a whole—and how consumers, companies, and the government interact.
Here’s how it works:
Key Indicators: There are a few important numbers that help us understand how an economy is doing:
- GDP (Gross Domestic Product): GDP is the total value of all goods and services produced in a country. A growing GDP indicates an expanding economy, while a shrinking GDP shows a contracting economy.
- Inflation: Inflation measures the rise in prices for goods and services over time. Some inflation is healthy and expected due to wage increases and other variables, but too much inflation means goods and services are getting too expensive, creating stress on consumers and businesses.
- Unemployment Rate: This tells us how many people are looking for jobs but can’t find one. High unemployment usually means companies are not hiring and the economy is struggling.
Supply and Demand
Macroeconomic analysis also examines the balance between the goods produced (supply) and the amount consumers buy (demand). If demand exceeds supply, prices typically increase, leading to inflation. If supply exceeds demand, businesses may cut prices to reduce current supply and lay off workers to moderate future supply.
The Role of Government: Governments play a big part in macroeconomics through:
- Monetary Policy: This is how central banks, like the Federal Reserve in the U.S., control the money supply and interest rates. Lowering interest rates can make borrowing cheaper, encouraging spending and investment while raising rates can slow down an overheated economy by removing money from the economy.
- Fiscal Policy: This involves government spending and taxes. During tough times, the government may spend more (for example, on infrastructure or social programs) to boost the economy or cut taxes so people have more money to spend.
- Global Connections: Macroeconomics also looks at how countries are interacting with each other. For example, if one country is in a recession, it might buy fewer products from other countries, impacting their economies too. Trade policies, currency exchange rates, and international investments are vital in a global economy.
Watch our latest podcast, “The Fed Cut Interest Rates…What it Means for You.”
Why Macroeconomic Analysis Should Be Important to You
Macroeconomic factors—such as global growth trends, inflation, monetary policy, and demographic shifts—all play a significant role in determining where capital flows and which economic sectors are likely to perform the best.
At Beck Capital Management, we track multiple indicators, including:
- The Federal Reserve, European Central Bank, and other central banks’ interest rate decisions can influence everything from bond yields to stock market valuations.
- Tax policies, government spending, and national debt levels directly impact domestic and global economic policies.
- Inflation can erode purchasing power, while deflation can stall economic growth. Both need to be monitored closely to make informed investment decisions.
Looking at International Monetary Policy and Fiscal Regimes
As Austin fiduciary financial advisors, we examine global monetary policies, which shape capital flows across global economies. Countries with lower interest rates and stable monetary policies often attract more investments.
For instance, when the U.S. Federal Reserve lowers interest rates, borrowing becomes cheaper, stimulating corporate investments and economic growth. On the flip side, rising interest rates can slow down economic activity, making it critical for investors to adjust their investment strategies.
At BCM, we also assess fiscal policies across different countries, especially in regions that are key players in global trade, such as Europe, China, Japan, and various emerging economies. Countries with expansionary fiscal policies (like increased government spending) often provide fertile ground for investments, particularly in sectors like infrastructure and technology.
We don’t recommend tradtional rebalancing! Watch our podcast on this important topic.
Demographic Developments: A Driving Force in Global Markets
In addition to monetary and fiscal policies, demographic trends are another important factor in our investment decisions. As populations age or the youth population expands in various regions, these shifts affect consumption patterns, labor markets, and demand for specific goods and services.
One of the most significant demographic trends we’ve observed is the aging population in developed markets, particularly in the U.S., Europe, and Japan. This trend is expected to drive increased spending in the healthcare sector, as older populations require more medical care and related services. For this reason, at BCM, we often consider the healthcare sector a prudent long-term strategy for pursuing portfolio growth.
Conversely, countries with younger populations, like many emerging markets, are poised for significant economic expansion as their working-age populations grow and consumer spending increases.
Economic Trends and Sector Allocation
After analyzing global macroeconomic trends, we assess which sectors we feel are most likely to benefit from these trends. Here are some key areas we focus on at Beck Capital Management:
- Technology and AI: AI and digital technologies are transforming industries. Companies leading in AI innovation are poised for growth. At BCM, we are currently focused on investing in tech companies driving AI advancements for long-term returns.
- Industrials and Infrastructure: Government infrastructure spending, especially in the U.S., offers multi-year opportunities in industrials, construction, and transportation. BCM monitors these sectors to determine their investment potential.
- Healthcare: With an aging global population, healthcare spending is set to rise dramatically. To capture this trend, BCM targets innovative companies in pharmaceuticals, medical devices, and health services.
- Utilities and Grid Modernization: Growing demand for energy and data infrastructure creates opportunities in utilities. Companies supporting the tech revolution’s infrastructure needs are well-positioned for growth.
Drilling Down: Selecting the Right Companies
BCM identifies strong companies within key sectors by focusing on financial health—balance sheets, earnings growth, stable management, and cash flow. We seek tech firms with innovative management and resilience, healthcare firms with diverse distribution pipelines and networks, and companies with adaptable, capable leadership. Strong management is key to long-term success, so we prioritize it in our investment processes.
How BCM’s Strategies May Benefit You
As Austin investment advisors, we aim to position your portfolio to take advantage of global economic trends while managing the associated risks. By taking a broad view of the global economy, we strive to identify the best countries, economic sectors, and companies to invest in, seeking long-term growth for reasonable amounts of risk.
As fiduciary financial advisors in Austin, we always put your interests first. We continuously analyze the economic environment and adjust your investments to help keep them in line with your goals, whether you’re focused on growing your wealth or preserving it for the future.
At Beck Capital Management, understanding global economic trends is a key to successful investing. Our strategy focuses on international factors like monetary policy and sector trends to help ensure your portfolio is aligned for future growth. If you’re ready to take the next step, contact our experienced team of financial advisors in Austin, and let’s create a plan to pursue long-term success.
Connect today to get your 30,000-foot view of your current portfolio.