The “Great Recession” has undoubtedly wreaked havoc in the financial world, leaving many investors wondering what portfolio strategies are best suited for this new, post-crisis environment. In his inaugural article since returning to Morgan Stanley, “The ‘Renaissance’ of Global Macro Investing”, Henry McVey highlights his current views on the direction of financial markets, and argues that a key upshot of the current crisis will be an augmented role for the traditional top-down, macro-investing approach.
The article examines the main factors driving this trend, and argues that investors within the asset-allocation community will have to enhance their analytical tools so as to find out which instruments will truly act as diversifiers, especially in periods of market stress.
Henry re-joined Morgan Stanley in June as the Head of the Global Macro and Asset Allocation investment team.
The executive summary is republished below, folowed by a link to the full article
An important upshot of the Great Recession will likely be a “renaissance” for the traditional top-down, liquid, global macro-investing approach. Several reasons, in my view, are contributing to the increased influence of macro factors in investment decisions. The most salient ones include:
• An unprecedented amount of government stimulus globally;
• Still-high correlations among markets and asset classes;
• A potential shift in demand drivers from developed to developing countries; and
• The importance of tactical agility during periods between bull markets.
In this paper, I analyze these topics in detail, and argue that-given the large changes we are experiencing across the global economy and entire investment business world-a broad array of constituents will likely re-embrace the merits of a top-down investment framework in the foreseeable future.
I also argue that investors within the asset-allocation community will be required to enhance their analytical tools in an effort to find out which investments will actually serve as diversification instruments for large portfolios, especially during periods of market stress.
Click here for the full article.
Source: Henrey McVey, Morgan Stanley Investmentfocus, July 2009.
