Global macro strategy.

In plain English

Global macro starts from the top down, beginning with a view about a whole economy, a central bank, or a government, and then choosing whichever market offers the cleanest way to bet on that view. The instruments are usually futures, currency forwards, government bonds, or index derivatives rather than individual stocks. Positions can be long or short and are frequently built with borrowed money, because the underlying moves in currencies and rates are small in percentage terms. Discretionary managers make the calls by judgment, while systematic ones run models.

01Why it matters

Macro results depend on a small number of large calls rather than on broad market exposure, so performance can look nothing like an index in either direction, and the borrowing involved makes a wrong call expensive.

02The math, step by step

A manager expects one country's rates to rise faster than another's and sizes a currency position at four times capital. A 2 percent move in the pair becomes roughly 8 percent on capital, in whichever direction it goes.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

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