How are you "macro equity" guys doing? (Druckenmiller/Bessent style)

Question

Wondering if there are any of you analysts/PMs on here who do equities from a macro standpoint like Druckenmiller and Bessent. In a recent interview, SD says the algos are throwing off the signals he used to glean information from about trends.

Are you guys finding it incrementally more difficult to make money in this environment?

DeepLearning · Accepted Answer

We have seen how algos trade in a crisis. There were shit tons of algorithmic funds and market makers in 2008. In fact, 2008 was the hayday.

Yes, there's been a big rise in passive funds but algorithms were still a massive component of the market during the financial crisis. They did..........pretty well. Equity algorithms blew up in August 2007, which was at a differentiated time from the rest of the financial crisis.

Your argument is mostly algorithm fear mongering that isn't really based on anything factual. There's little evidence that algorithms drove the sustained bull market.

traderlife · Answer

Yes he is right.  Price is no longer truth in markets.  It’s ran by machines and quants now who do not know a lot about fundamentals.

Look at the Vix move in February.  There’s no way a fundametnal guy looking at news would have seen that move.  It was pure algos.  Tightly run algos lifting stocks non-stop in January then puking out in 36 hrs in February.

Majority of money either doesn’t care (passive) or is ran by machines.

DeepLearning · Answer

If the relationship between future prices and news is weaker, it's because quants and just better technology in general has allowed for markets to assimilate market-relevant information faster.

Otherwise known as....alpha decay.

I have no substantive evidence to suggest what I'm about to say but my intuition tells me that it is not the algorithms that are at fault. You're right that algorithms make price movements faster. But do they magnify those moves? Generally, I do not think that is the case. What magnifies price movements are derivatives and levered instruments.

sonibubu · Answer

^this is spot on. The days of doing better work and front running the vanilla long only guys are over. "uninformed buyers" (the guys not doing fundamental work, aka ETFs and algos) dominate volume. It's really hard to fight a stock when an ETF is indiscriminately buying as it gets inflows. And the Quant funds are leading to violent factor moves you just never saw before.

It's much tougher to make money these days, which is just Micro 101: high profits lead to competition, which squeezes margins.

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How are you "macro equity" guys doing? (Druckenmiller/Bessent style)

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How are you "macro equity" guys doing? (Druckenmiller/Bessent style)

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