What are the key macroeconomic trends IB analysts should know to identify investment opportunities?

1 Growth and recovery

The global economy is recovering from the unprecedented shock of the COVID-19 pandemic, which caused a sharp contraction in output and demand in 2020. The pace and shape of the recovery vary across regions and sectors, depending on the effectiveness of the public health measures, the fiscal and monetary stimulus, and the vaccine rollout. IB analysts should monitor the growth forecasts and indicators of different countries and industries, as well as the potential risks and uncertainties that could derail the recovery, such as new virus variants, policy mistakes, or social unrest. The growth and recovery trend can create opportunities for IB analysts to identify sectors and companies that are benefiting from the rebound in demand, such as technology, e-commerce, health care, or green energy, or those that are undervalued or distressed, such as travel, hospitality, or retail.

2 Inflation and interest rates

The inflation and interest rates trend is closely related to the growth and recovery trend, as they reflect the balance between the supply and demand of goods and services in the economy. Inflation is the increase in the general level of prices, while interest rates are the cost of borrowing or lending money. Both inflation and interest rates affect the profitability and valuation of companies, as they influence their revenues, costs, cash flows, and discount rates. IB analysts should track the inflation expectations and outcomes of different countries and sectors, as well as the monetary policy actions and signals of the central banks, such as the Federal Reserve, the European Central Bank, or the Bank of Japan. The inflation and interest rates trend can create opportunities for IB analysts to identify sectors and companies that are resilient or benefit from higher inflation, such as commodities, consumer staples, or financials, or those that are sensitive or vulnerable to higher interest rates, such as utilities, real estate, or highly leveraged firms.

3 Trade and globalization

The trade and globalization trend refers to the degree and direction of the integration and interdependence of the world economy, which affects the flows of goods, services, capital, and people across borders. Trade and globalization are influenced by the trade policies and agreements of different countries and regions, such as the US-China trade war, the Brexit deal, or the Regional Comprehensive Economic Partnership. They are also affected by the geopolitical tensions and conflicts that could disrupt the global supply chains and markets, such as the US-Iran sanctions, the Hong Kong protests, or the Myanmar coup. IB analysts should analyze the trade and globalization trend to understand how it impacts the competitive landscape and growth prospects of different sectors and companies, as well as the cross-border M&A and capital raising opportunities and challenges.