How Investors Utilise Cross-Asset Analysis To Track Global Macroeconomic Trends

The global financial market is deeply interconnected at many levels. A micro change in US interest rates, for instance, can influence global oil prices and affect the cost of running a business in Warwickshire. For investors, policy shifts in one sector create ripples that spread through the commodity and foreign exchange markets, presenting opportunities to grow their portfolios.

Staying on the right side of macroeconomic change requires technical knowledge of the reasons why markets move and skills in interpreting market data. Since markets are fundamentally related, investors confirm macroeconomic trends through their shared triggers.

Why Investors Use Cross-Asset Analysis to Read Macro Trends Across Markets

Investors take a multi-asset approach to studying and interpreting market trends. This is because currency, commodity and equity markets are all unique but closely connected. A move in one often triggers a reaction in another. For example, rising commodity prices can directly impact a country’s currency value, while equity markets respond to the same underlying forces. Platforms like OANDA make this easier to track by offering multi-market dashboards that display all three asset classes in a single view. Investors who identify these connections can also profit from them using derivative instruments such as CFDs or spread betting, which allow exposure to price movements across different markets without owning the underlying assets. 

Using a multi-asset dashboard to analyse financial markets offers several benefits. These include:

1. It eliminates market blind spots: For investors, getting the immediate context of any market move is important to their decision-making. With multi-asset dashboards, investors can identify the true drivers of isolated moves. This removes any blind spot and helps them to make sense of specific and broader trends.
2. Accelerated analytical speed: Financial markets are typically fast-moving. Prices are always changing, and trends can move quickly while an investor is still switching between disconnected charts. Using a multi-asset chart removes this delay and allows investors to see how prices move across multiple markets simultaneously.
3. Spotting divergences: Markets can react to the same stimulus in different ways, and they definitely do so at different speeds. For example, a higher inflation rate causes currencies and bonds to decline, but commodities surge. When investors can see these changes side by side in real time, it helps them make short-term trading decisions.
4. Real-time risk management: real-time access to market data helps investors plan and execute their risk management strategies. A centralised dashboard is an early-warning system that tracks cross-asset pairs such as Copper and Gold, as well as high-yield credit. Using the data provided, investors can decide whether to adjust their portfolios.

How Investors Use Cross-Asset Analysis To Track Markets

Now, let’s look at how investors actually compare multiple markets using multi-asset dashboards. On trading platforms like TradingView, users can select two or more charts in separate windows and combine them into a mega dashboard.

Bonds vs Equities

Government bonds and stocks usually have an inverse relationship. When the economy is under standard conditions, and investors are confident, they sell safe-haven government bonds to buy equities. This pushes bond yields up and stock prices higher. The reverse happens when investors are not confident: they buy government bonds, pushing down equity and bond yields.

An investor tracking the S&P 500 bullish trend, for example, can have charts showing the 10-year Treasury yield. If the 10-Year yield is rising alongside the S&P 500, it signals strong macroeconomic growth. Investors can interpret this in real-time and see how both markets respond to news and economic data.

Commodities vs Currencies

Comparing charts of commodities and currencies also helps investors to make sense of market trends. This is because commodities are usually priced in U.S. Dollars, which is the world’s dominant currency in global trade. Commodities like crude oil have an inverse relationship with the USD but may correlate with other currencies, such as the Canadian dollar.

For instance, an investor tracking the price of crude oil and the USD on two separate charts can find trading opportunities when crude oil rises or falls. One way to do this is to watch the Commodity Research Bureau Index (CRB Index). A rising CRBI suggests inflation is increasing, which could signal the US dollar is weakening. Investors interpret this as a macroeconomic indicator and can fairly predict the currency trend and the Federal Reserve Bank’s response.

Gold vs Real Yields

Gold is also a strong reactive indicator, reflecting changes in exchange rates, geopolitical tensions, and inflation. As a non-yielding asset that serves as a hedge against inflation and systemic risk, gold moves inversely to real interest rates. When real yields fall, investors flock to gold, making it highly attractive. This signals that international investors are hedging against severe inflation, usually independent of the equity markets.

How to Set Up Multi-Asset Analysis

1. Find a platform with advanced charting tools. This is crucial to analysing several markets and making sense of the data. Platforms like Tradingview allow integrations, so investors can compare prices from Oanda and leading brokers.
2. Select the charts and customise the look to maintain distinct charts. Create a clean dashboard layout and input the four core asset classes, e.g. equities, currency, government bonds, and commodities. Adjust the timeframes and 
3. Use built-in tools like split screens, the compare tool (overlay and relative performance), and the multi-asset screener to analyse trends. Another useful tool is the correlation coefficient, which measures the degree of association between two assets.
4. Compare and analyse! Match fundamental drivers with technical moves and understand why a trend is happening. Get a comprehensive overview of the financial market and track how changes in one affect the other.

Closing thoughts

Multi-asset analysis is a game-changing advantage for investors who prefer a more balanced approach to investing. Tying specific events to global macroeconomic trends allows investors to wade through the noise and decide whether to buy, sell, or hold their positions. Thanks to modern platforms like Oanda and Tradingview, investors can access real-time market data in multiple windows at once!