Microeconomics is about individual economic actors–people, families, companies…and the way they interact with/compete with each other. Macroeconomics, typically using elaborate computer models, tries to describe the expected state of major forces–the working population, businesses, governments of all stripes–that are likely to give genera; shape to the economic path of a given country. For most countries, there’s a third branch of economics–international–which tries to describe the economic interaction among different countries as expressed through trade and associated currency/interest rate fluctuations.
There isn’t any generally-accepted framework for international economics, and for US stock market investors, the main issue I see is the relative strength of the dollar vs. other currencies. Currency movements are crucial, in my view, to understanding most non-US markets, but not so important domestically.
This is what most brokerage house economists in the US focus on–forming a high-level view of how the overall economy is likely to move over the coming year or so (yes, even though something like half of the profits of publicly-listed firms come from foreign operations), and the implications of changing interest rates and accelerating/decelerating growth on profits.
Market strategists use this top-down input to make predictions about the overall direction of the domestic stock market and of the profits of publicly-traded corporations. My experience is that this entire process takes a lot of computing power and mental effort, and still doesn’t work so well.
The consensus view a year ago, for example, was that recession–and a sharp (-20% or so) decline in stocks–was in the cards for 2023. The S&P 500 did spend a couple of days in the red in early January, but only then, and has turned in a return (including dividends) of 20%+ so far this year.
Microeconomics, on the other hand, is the essence of securities analysis. It’s about how firm vs. firm and industry vs. industry competition transpire. There’s a wealth of academic literature in this subject, but until very recently it has not been the road to tenure or renown in academia. Yes, Michael Porter of Harvard Business School has been fabulously successful over many decades, but much of his renown, I think, has been for his skill in recasting the academic corpus into language a layman can understand.
Another plus for micro is that I think there’s been a steady decline in the quality of securities analysis done by brokers over the past decade or so. If this perception is correct, you and I are no longer metaphorically arm wrestling against Superman but against some guy in the mall parking lot.
My tentative view of 2024 is that it will start out as a sideways year for stocks. My guess is that themes like changes in the global auto industry will be important, as will poking through the rubble of stocks/sectors pounded into the ground this year. 2024 may also be the first time in decades where it makes sense to look at stock markets in Europe and Asia, both for multinationals and for smaller, domestic-oriented growth stocks. Japan, for example? Getting reliable information about non-US firms will be crucial, though.
I think there are real questions about Utilities, Energy and Real Estate. Maybe Banks, too. To me, though, the biggest imponderable is what does it say to the investment world if the party of Lincoln puts up as its candidate for president a man who tried to overthrow the government in 2021? What will capital flight look like if Trump were to win?