Practical Macro
Learn to apply macroeconomic insights to real-world investment decisions and confidently navigate markets through every phase of the economic cycle.
Structure & duration
15-20 hours to complete
Online self-paced
Practical Skills Modules can be completed online at your own pace.
Prerequisites
We recommend candidates have familiarity with the principles behind Economics, Fixed Income, and Portfolio Management content from the Level II CFA curriculum.
Practical Macro PSM available starting with February 2026 Level III candidates. Not available to candidates sitting for a 2025 exam.
Overview of Practical Macro
In the Practical Macro module, you will learn how to apply top-down economic analysis to investment decision-making. You will explore how macroeconomic conditions affect capital markets and portfolio strategies, and develop skills to analyze key indicators such as GDP, inflation, monetary policy, and interest rates.
Macroeconomic awareness is essential for anticipating shifts in markets and adjusting investment strategies accordingly. For investment professionals managing portfolios or advising clients, the ability to interpret macro signals and translate them into actionable insights is a critical competency. This module bridges theoretical macroeconomics with practical, real-world application.
Through scenario-based videos, case studies, and interactive knowledge checks, you will gain hands-on experience using macroeconomic frameworks to assess economic environments, forecast market behavior, and make informed investment recommendations. Upon completion of this module, you will be equipped to integrate macroeconomic analysis into portfolio construction and strategy with greater confidence and impact.
Key learning objectives for Practical Macro
- Identify and evaluate potential investment targets through comprehensive deal screening and selection processes, utilizing market analysis and strategic frameworks.
- Conduct thorough financial due diligence to assess and mitigate financial risks, ensuring informed investment decisions.
- Understand and apply legal and tax due diligence processes to navigate regulatory requirements and protect investment interests.
- Analyze operational aspects of target companies to ensure post-investment efficiency and value creation.
- Develop valuation and deal structuring skills to optimize capital structures and achieve strategic investment goals.
- Implement effective monitoring and exit strategies to manage risks and maximize investment returns.
Key learning objectives by unit
- Analyze the limitations of traditional economic theory and develop a more practical approach to understanding modern economies.
- Evaluate the unique characteristics of consumer-driven economies and their global interconnections.
- Apply key macroeconomic indicators and concepts to assess the current stage of the business cycle and forecast the likelihood of potential outcomes.
- Interpret key economic data series (LEIs, CEIs, LAGs, inflation, and PMIs) and their roles in forecasting economic performance.
- Critically assess the implications of different economic indicators on monetary policy, investment strategies, and business cycles.
- Synthesize various macroeconomic indicators to make informed predictions about market and economic trends.
- Explain Anticipatory Economic Indicators (AEIs), including their relationship with monetary policy and their predictive power in financial markets.
- Evaluate the effects of interest rate changes on key economic sectors, such as housing, and understand how these fluctuations impact broader economic indicators and market trends.
- Apply AEIs, including the yield curve, interest rates, and inflation measures, to forecast shifts in the business cycle and assess their implications for economic growth and market behavior.
- Explain the Federal Reserve’s dual mandate and how its monetary policy tools are used to influence macroeconomic conditions.
- Analyze the key indicators used by the Federal Reserve to set monetary policy, including the yield curve, neutral rate, and Taylor Rule, and evaluate their predictive power for economic trends.
- Assess the impact of Federal Reserve tightening and easing cycles on financial markets and the broader economy, particularly in terms of employment, inflation, and GDP growth.
- Critically evaluate the effectiveness of monetary policy in managing economic cycles, and explore the limitations of these tools in achieving long-term economic stability.
- Describe Fiscal Policy Evolution: Evaluate how U.S. fiscal policy has changed over time and its impact on economic growth and markets.
- Analyze Fiscal Policy and the Business Cycle: Assess how fiscal policy interacts with the business cycle, including delays in its effects.
- Examine Political Influence on Fiscal Policy: Discuss how political decisions shape fiscal policies and their economic outcomes.
- Evaluate Key Fiscal Policies: Critically review major U.S. fiscal policies, such as the 2017 Tax Cuts, and their broader economic impacts.
- Explain the role of the U.S. dollar as a global reserve currency and its impact on international trade and financial stability.
- Analyze how shifts in U.S. dollar strength or weakness influence global economic conditions and market sentiment.
- Forecast U.S. dollar movements based on key economic indicators and macroeconomic regimes.
- Evaluate the effects of U.S. dollar trends on different sectors of the global and U.S. economies, particularly in terms of equity markets and trade-sensitive industries.
- Explain how different phases of the business cycle influence stock market performance and investor behavior.
- Analyze the relationship between leading economic indicators (such as PMIs) and equity market returns, particularly during market inflection points.
- Develop strategies for equity allocation that consider the varying impacts of corporate earnings and P/E ratios across business cycle phases.
- Evaluate global stock market trends in the context of economic cycles, highlighting how synchronized or divergent movements across asset classes affect investor decisions.
- Describe how macroeconomic indicators influence corporate earnings and identify historical patterns that foreshadow earnings trends.
- Analyze the impact of business cycles on earnings expectations by evaluating specific economic indicators such as PMIs and earnings revisions.
- Apply macroeconomic analysis to forecast corporate earnings for individual companies and equity indices using both top-down and bottom-up approaches.
- Explain key concepts such as earnings elasticity, earnings surprises, and international economic trends, and analyze their significance in financial forecasting and market behavior.
- Explore how P/Es have historically influenced equity returns, focusing on their relationship with earnings, interest rates, and inflation.
- Assess P/E fluctuations in relation to macroeconomic indicators like inflation, business cycles, and interest rates.
- Critically examine common misconceptions about the role of P/Es in financial market valuation, using historical and modern examples.
- Utilize frameworks for forecasting market multiples and understanding the sectoral and style differences that impact index valuations over time.
- Evaluate the global factors that influence bond yields and their effects on asset allocation decisions across various sectors.
- Explore the use of forecasting models, such as the Kim-Wright model, to predict bond yield trends and their implications for different economies.
- Investigate how changes in bond yields affect other financial markets, such as equities and commodities, and influence investment decisions.
- Analyze how leading economic indicators (e.g., PMIs, unemployment claims) can be used to forecast bond yield changes and assess investment risks.
- Evaluate the role of cognitive biases in shaping investor behavior and financial decision-making within macroeconomic contexts.
- Examine the psychological underpinnings of financial market anomalies, with a focus on past market bubbles and crashes.
- Develop a critical understanding of behavioral finance's impact on traditional finance theories, particularly in the context of market efficiency.
- Build a framework for recognizing and mitigating cognitive biases in investment strategies to enhance market analysis and decision-making.
- Understand the complex relationship between global economic cycles and U.S. equity market trends, particularly during periods of divergence between developed and emerging markets.
- Assess and monitor financial risks in emerging markets using key macro and micro indicators, including export dependency, debt levels, and exposure to cyclical sectors.
- Analyze the critical role of the U.S. dollar in influencing global equity markets, with a focus on how dollar strength or weakness impacts emerging market economies and their financial health.
- Evaluate trends in global market correlations and systemic risks, recognizing the opportunities and challenges they present for investors in an increasingly interconnected global economy.
- Identify and describe the key theories and developments in asset allocation from the 1950s to the present, explaining their impact on modern investment strategies.
- Critically assess how global economic indicators, such as PMI and commodity prices, influence asset allocation decisions in both developed and emerging markets.
- Utilize tools such as the Altman Z-Score and the TMI Credit Model to assess financial risks and investment opportunities in emerging markets, ensuring alignment with long-term portfolio goals.
- Analyze the historical performance of asset allocation strategies across different economic cycles, identifying patterns of success and failure in managing risk and return.
- Analyze the relationship between macroeconomic indicators and sector performance, both in domestic and global markets.
- Evaluate sector and industry dynamics to optimize portfolio positioning across different phases of the business cycle.
- Apply sector classification frameworks to make informed decisions on sector rotation and asset allocation.
- Interpret the effects of global macroeconomic changes on sector leadership, using data from diverse geographical markets.
- Synthesize macro and intra-sector analysis to develop a comprehensive global investment strategy.
- Explore how economic variables such as inflation, GDP growth, and interest rates impact the performance of Value and Growth stocks and apply this understanding to informed investment decisions.
- Create a strategic approach to portfolio management by selecting equity factors and sectors that align with the current phase of the business cycle to improve performance through cyclical changes.
- Use quantitative analysis tools to detect cyclical inflection points and adjust portfolios proactively to manage risks and opportunities during transitions between different economic phases.
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