At Element Macro Research, we don't put a whole lot of weight into price targets as we firmly believe that the future is unknowable and thus forecasting is a futile exercise. We're not sector specialists or fundamental stock experts.
Element Macro Research utilizes a top-down macro research approach where we begin with the "big picture" and work our way down into sectors and individual securities as a way to express a given theme. We do that, not by attempting to guess the future like most of your traditional Wall Street firms, but by breaking everything down into four key pillars: Valuation, Liquidity, Sentiment and Technicals.
Routinely evaluating these core factors, our goal is simply to put the odds in our favor with an understanding of the larger macro forces at play. But having the odds in your favor isn't good enough. We firmly believe that any fundamental view must be confirmed by the technical picture.
Once we have identified the opportunities with the greatest potential, we turn to a handful of our proprietary acceleration models to tell us when it's time to act because acceleration is often a sign that there has been a sudden shift in market sentiment.
In its purest form, we firmly believe that one should only be invested when prices are moving.
Element Macro Research utilizes a top-down macro research approach where we begin with the "big picture" and work our way down into sectors and individual securities as a way to express a given theme. We do that, not by attempting to guess the future like most of your traditional Wall Street firms, but by breaking everything down into four key pillars: Valuation, Liquidity, Sentiment and Technicals.
Routinely evaluating these core factors, our goal is simply to put the odds in our favor with an understanding of the larger macro forces at play. But having the odds in your favor isn't good enough. We firmly believe that any fundamental view must be confirmed by the technical picture.
Once we have identified the opportunities with the greatest potential, we turn to a handful of our proprietary acceleration models to tell us when it's time to act because acceleration is often a sign that there has been a sudden shift in market sentiment.
In its purest form, we firmly believe that one should only be invested when prices are moving.
Four Pillars Explained
Liquidity
It was once said that the most attractive environment for equity prices were periods of subdued growth where monetary policy is easiest in an attempt to boost the economy. If there were any doubt to this sentiment, one needs to look no further than the 10-year period following the Global Financial Crisis. While conventional theory says that growth and earnings drive equity prices, we subscribe to the theory that liquidity is the primary driver of markets. Whether it's the direct expansion or contraction of credit within an economy or the indirect behavioral incentives impacting risk appetite, liquidity is the bedrock of financial markets.
Valuation
Although it is notoriously poor at its timing ability, valuation helps to inform our long-term views as to which areas of the market possess the most robust profit opportunity. As opposed to focusing on any singular measure of value, we constantly review each asset against peers as well as relative to its own history. Believing that no one measure is all encompassing, we use a blend of metrics and times periods to determine value.
Sentiment
We use a wide range of metrics to determine sentiment including pre-packaged indicators like the University of Michigan Consumer Sentiment to provide clues on long-term shifts in macroeconomic sentiment. For our more tactical decisions, we implement numerous proprietary market indicators which have been built on our experience with systematic risk premia and hedging strategies. While volatility doesn't provide the catalyst, it can provide hints on hidden vulnerabilities.
Technicals
Appreciating much of Technical Analysis has previously been dismissed as subject to great interpretation, we focus much of our efforts on the quantifiable aspects like momentum and relative performance. Our proprietary scoring system is based on four underlying aspects: Trend, Oscillators, Positioning and Momentum. Subjective views are limited to well-understood behavior phenomena like horizontal support and resistance levels.
It was once said that the most attractive environment for equity prices were periods of subdued growth where monetary policy is easiest in an attempt to boost the economy. If there were any doubt to this sentiment, one needs to look no further than the 10-year period following the Global Financial Crisis. While conventional theory says that growth and earnings drive equity prices, we subscribe to the theory that liquidity is the primary driver of markets. Whether it's the direct expansion or contraction of credit within an economy or the indirect behavioral incentives impacting risk appetite, liquidity is the bedrock of financial markets.
Valuation
Although it is notoriously poor at its timing ability, valuation helps to inform our long-term views as to which areas of the market possess the most robust profit opportunity. As opposed to focusing on any singular measure of value, we constantly review each asset against peers as well as relative to its own history. Believing that no one measure is all encompassing, we use a blend of metrics and times periods to determine value.
Sentiment
We use a wide range of metrics to determine sentiment including pre-packaged indicators like the University of Michigan Consumer Sentiment to provide clues on long-term shifts in macroeconomic sentiment. For our more tactical decisions, we implement numerous proprietary market indicators which have been built on our experience with systematic risk premia and hedging strategies. While volatility doesn't provide the catalyst, it can provide hints on hidden vulnerabilities.
Technicals
Appreciating much of Technical Analysis has previously been dismissed as subject to great interpretation, we focus much of our efforts on the quantifiable aspects like momentum and relative performance. Our proprietary scoring system is based on four underlying aspects: Trend, Oscillators, Positioning and Momentum. Subjective views are limited to well-understood behavior phenomena like horizontal support and resistance levels.