Economists of the Future Reshape Macro Investing with New Predictive Tools and Alternative Data

Early career economists embrace generative AI applications for forecasting models as the single most valuable area for transformation

NEW YORK, Oct. 30, 2024 /PRNewswire/ -- Coalition Greenwich today released a new study conducted in partnership with Bloomberg L.P. that assesses how U.S. economists and strategists are utilizing data, analytical tools and emerging technology in anticipation of the most impactful macro events, including the U.S. Presidential Election. The study reveals that economists from leading asset managers, top banks and broker research firms, NGOs and government agencies are adopting new predictive tools, alternative data and generative AI.

• Prediction markets are the #1 tool economists are using to analyze the market effects of the U.S. Presidential Election—beating real-time and state-level polls, social media, and campaign donations.
• In addition to prediction markets, economists rank alternative data—particularly social media sentiment analysis and real-time consumer transaction data—and Generative AI-enhanced analytics as the #2 and #3 most important tools to analyze macro drivers over the next 12 months.
• Early career economists highly value generative AI for use in forecasting models as the single area of their workflow that may be transformed in the coming 2-3 years. Forecasting models generate predictions about market trends, currency movements or economic indicators.

Kevin McPartland, Head of Market Structure and Technology Research at Coalition Greenwich, said: "With news cycles getting ever shorter and traders reacting more quickly to market events, economists can no longer count solely on widely disseminated macro-metrics to provide actionable commentary. As such, economists are increasingly looking to complement traditional metrics with new predictive tools and alternative datasets to understand the macroeconomic environment in a more nuanced way. And while the use of AI remains limited as a predictive tool, some cutting-edge economists are beginning to see results."

The role of economists continues to evolve as they conduct thematic and market analysis on government policy responses, the effects on the labor market and other macro drivers that move markets and impact investment portfolios. Economists' heightened demand for alternative data and generative AI-enhanced research solutions reveal how the macro investment industry may evolve in the future. For example, the majority of early-career economists¹ believe alternative economic indices are now more valuable than traditional point-in-time metrics when analyzing the U.S. economy. Economists also indicate their top priority is seamless access to consistent and compatible data across analytical tools and data feeds when analyzing macro trends. This emphasis on data quality and interoperability is an essential component to the rapid adoption of generative AI.

Michael McDonough, Chief Economist for Financial Products at Bloomberg, said: "Advancements in technology have delivered macro investors access to vastly larger datasets and accelerated trading strategies, but there is still a need for analytics that enable them to seamlessly interpret complex macro trends. In the future, economists will use proprietary tools that feature alternative economic indices as well as generative AI solutions so they can interpret information and communicate insights with unprecedented speed and precision."

Bloomberg's macro solutions include the World Economic Analyzer {ECAN<GO>} tool which allows Bloomberg Terminal users to analyze a range of key economic indicators and pinpoint the factors driving current and historical values. {ECAN<GO>} includes the recently launched Bloomberg Second Measure (BSM) U.S. Consumer Spend Index, which utilizes Bloomberg's proprietary alternative data analytics to provide a near-real time comprehensive view of U.S. consumer spending alongside more traditional financial data. The Worksheet Sample Library Election {WSL ELECTION <GO>} solution on the Bloomberg Terminal allows users to access display-only, near-real time predictive market data and Bloomberg Second Measure observed U.S. political donations. {WSL ELECTION <GO>} meets client demand for ways to analyze risk to their investments around market-moving macro events like the U.S. Presidential Election. Bloomberg Economics' Fedspeak and ECBspeak indexes {BECO MODELS <GO>} use natural language processing to track central bank sentiment. Alternative data from internet job searches to satellite images are integrated into analysis of the macro outlook {BECO <GO>}.  

Learn more about Bloomberg's macro solutions by visitingBloomberg.com/companyand request access to the study.

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¹ Early career economists and strategists refer to respondents with less than 15 years of experience.

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SOURCE Bloomberg L.P.