Our Mission

​​​​Queen Elizabeth famously asked economists at the LSE - "Why did no one see it coming?" - in the aftermath of the Great Financial Crisis. ​ Although the failure to foresee the GFC is a rather extreme example, there is no shortage of evidence to illustrate the inability of 'orthodox' macro models to accurately forecast economic activity. While private sector analysts are quick to lambast the poor record of central bankers, the same theoretical underpinnings also plague the frameworks utilized by these pundits (generally defined as the 'New Monetary Consensus').​

 

Valo Macro was thus formed with the mission to improve upon the current state of macro analysis. We do not pretend to have a crystal ball- forecasting economic behavior is undoubtedly a very difficult endeavor- rather we simply believe there to be fatal flaws in traditional macro frameworks and an incredible amount of 'meat left on the bone' when it comes to economic forecasting.

 

Key to our mission is the belief that incumbent sell-side research is far too superficial, heavily relying upon charts and 'indicators' without sufficient understanding of the underlying mechanisms at play. Given the dearth of relevant case studies (e.g., there are few "inflationary" periods in US history to draw from), this type of analysis can be dangerously misleading.

 

There is commonly an implicit assumption in macro research that "It's never different this time". By contrast, the ethos of Valo Macro is that "this time is always different".  The economic system is a dynamic, ever-changing being with very few stable relationships: sometimes QE adds liquidity, other times it drains it; sometimes interest rates fight inflation, other times higher rates spur it. In short, there are a litany of relationships where causality is heavily contingent upon the current state of the monetary system. One of our primary aims at Valo Macro is thus to provide more nuanced analysis to the charts and data that are commonly propagated by economic analysts. ​

 

We believe that our heterodox approach to macro forecasting leads not only to better performance but also to orthogonal conclusions. For example, our approach to liquidity analysis enabled us to be one of the few to warn about severe monetary stress a week before the collapse of Silivon Valley Bank, during a time in which most 'liquidity experts' were claiming that the monetary system was in a liquidity 'supercycle'.   ​​​​