Why is it so important to address macroeconomic research?

Macroeconomic trends affect every aspect of the economy, and as a result, every business within the financial services industry. In the turbulency created from the current pandemic, financial services professionals need more insights than ever at their fingertips, and for these to be structured in such a way as to allow them to make informed decisions. We need better ways of finding and organising that content.

Every asset class is impacted by what central banks do. In turn, the central banks are affected by what the economy is doing. This relationship impacts some asset classes, like FX, money markets and bonds, more than others, but ultimately everything derives from here. Equities and commodities are other great examples. Everything at its core is tied back to macroeconomic data and to the reality that data represents. 
 
Identifying macro themes and topics presents a unique problem. In essence, there is no ‘code’ or ‘ticker’ for monetary or fiscal policy, like there are with equities or instruments. It’s not possible to type in IBM or VOD and look at a real-time tracker, as would be the case for IBM or Vodafone stocks. In fact, even typing in ‘GDP’ would be problematic as this would miss ‘growth’ and typing in ‘growth’ would get results about growth which have nothing to do with economic growth. Even refining that search to ‘GDP Growth’, would present similar issues.  
 
After all that trouble, it’s also worth remembering that GDP on its own is fairly meaningless if it’s not associated with a country, like the US. Yet having made that search, if a document has a sentence mentioning that ‘the Fed’ is worried about ‘growth’ would a standard search be able to pick it up?  Would it even be the right type of growth? It could well be that the article is discussing growth of the Fed’s balance sheet which again, has nothing to do with GDP.  Add this into the ‘alphabet soup of macroeconomics’ – HICP, HICPxT, RPI, RPI-X, RPI-J, CPI, CPI-F, CPI-H –  and it can be really difficult to get to the heart of the matter, not least as some of those acronyms are company tickers too!   
 
All this means that given the huge impact that macroeconomic trends have on every aspect of the economy, particularly during this pandemic, disambiguating these terms and supporting macroeconomic research is more vital than ever.  

The challenges for financial professionals managing and distributing macroeconomic research

Current research processes are frustrating: the irritating, never-quite-perfect search terms, the endless list of documents, opening each one individually only to find that it isn’t what you are looking for.  

Imagine a future where you could type in just one search term to immediately have all of the most relevant information at your fingertips and imagine having that on your desktop tomorrow. Technology is rapidly bringing that future about, and  Rich NLP and Synonyms play an especially central role in this regard. 

The potential of Rich NLP in macroeconomic research

Macroeconomic documents tend to be based around multiple geographies. If you are trying to use traditional techniques to analyse these documents then the software is typically basing its deductions on the proximity of words to one another. However, if the country is derived from a sub-title or inferred by the discussion of a specific topic like former-Supreme Court Justice Ginsburg, then that system doesn’t work. A form of Rich NLP which is capable of identifying the flow of the article, titles, subtitles, styles and formatting in a manner closer to how a human would read it, is needed to provide much more accurate results. In turn, this would save time for the reader, enhancing their research with accurate and appropriate linkages to other documents.  
 
Seeing more than one document at once, by picking out relevant paragraphs, seems like a simple innovation but it enables people to understand the macroeconomic landscape of any country, supports them in building a fuller picture from which to make a decision and enables them to do so much faster and much more efficiently.  

The importance of leveraging synonyms 

Similarly, given the complexity of macroeconomic discussion and its international nature, many different terms are used to describe similar things. It’s critical to pay such close attention to synonyms. If you search ‘US-China trade war’ you need to see results for trade tension, trade spat, protectionism, anti-dumping measures, minimum import prices and tariffs – just to name a few! You also need to avoid anything to do with the word ‘trade’ when it refers to an investment decision as opposed to the exchange of goods and services between the US and China.  

How technology can help market participants react to a news-driven macroeconomic agenda  

One good example is the resignation of Shinzo Abe as Japanese Prime Minister. Research technology can help market participants rapidly familiarise themselves with the political situation in Japan, likely successors to Abe, and the impact that their policy preferences would have on macroeconomic trends. ‘Suganomics’ would be one example of those synonyms that helped identify key material. 
 
But that’s ultimately reactive. If you were proactively looking to develop a strategy around APAC investments, ensuring there’s no missing information, through its taxonomy, ontology and contextual awareness is vital. Technology can help by highlighting what is being written about and provide the means to find key information even when different terms and anglicisations are used for the same thing. In turn, this ensures you are well-versed on Malaysian monetary policy before taking that Malaysian position. 

We can finally go beyond specific asset-class expertise to focus on entire geographies and macroeconomic trends.