Advisors sometimes need to focus their sights on the big long-term picture to see what is affecting current markets, according to the Macro Institute, a research and educational organization based in New York City.
The Macro Institute describes itself as a professional development and research hub whose mission is to empower investment professionals across the financial industry with macroeconomic education, market insights, and community networks.
The institute was created in 2020 to help advisors learn how economic trends should be used by advisors to construct their clients’ portfolios, according to institute CEO Katherine Krantz.
Krantz, who has a background in research amd wealth management, said in an interview that she was surprised when she and researcher Francois Trahan started looking into financial training and could find nothing that attempted to show advisors or financial leaders how trends stretching out at least 18 months affect markets and how the trends can be used to predict equity market movements.
For instance, advisors and investors often rely on the short-term impact of interest rates as the Federal Reserve raises or lowers them, when in reality they should be looking out 18 months.
“It takes that long for the impact of a change in interest rates to work its way through the economy,” Krantz said, “and then it takes another six months to have a real effect on the GDP. Investors think the Federal Reserve Board rate hikes are already priced into the market, but that is not true.”
The institute offers the Macro Specialist Designation program to help advisors learn these macro techniques. Training for the designation takes 18 months and can be completed online.
Advisors need to complete three levels of instruction to earn the designation. The first concentrates on the behavioral finance and the biases that people have for investing for the short term.
“Advisors and investors often have a recency bias that makes them follow the momentum of the market, when they should be looking further into the future,” Krantz said.
Level two concentrates on the global economy and the U.S. position in it. The role of the dollar in the global markets is explored in this section of the course.
“Level three focuses on the red flags that advisors should look for as long-term indicators of trouble,” she said.
“This training gives advisors another way to talk to clients about their investments because it changes the way they look at the investment process,” Krantz said.