Lecture Abstract : From Economic News to Formulating Market Views and Investment Strategies
For the active fund management industry the challenge has always been to produce alpha, the Holy Grail return that comes from the ability to outperform benchmark indexes by virtue of skill, research and insight. But at the time when major uncertainties weigh on investors' minds, demand for expertise ---in order to extract insight from macroeconomic data, geopolitical events, and shifting global growth balance --- is very high. In the United States the stunning victory of Trump has posed new challenges as investors struggle to adjust to a new breed of economic populism with important implications for government spending, taxes, and monetary policy. Outside the US, China is in the midst of a major economic transformation, while Europe still feels the fallout from its sovereign debt crisis and Brexit ramifications. In asset markets, stocks have rallied, driven by excessive monetary policy in advanced countries that are now shifting gear to fiscal stimulus.
With the world as complex as it is, what then drives investment decisions in the fund management industry? The first of this lecture series will focus on this question by elaborating on how market views are formulated through application of intelligence to make sense of a raft of daily economic and financial information provided by media sources, market commentators, sell –side analysts, and academic researchers. While there is a growing body of academic work that recognizes the media as key players in financial markets, a systematic approach that looks at the broader range of agents in information diffusion process would yield greater analytical rigor and useful actionable investment insights. This broader approach provides the framework for a more detailed analysis of how investors are coming to terms with and anticipating fiscal activism and greater infrastructure spending from the new US administration.