188. Verneri Pulkkinen answered Alokas’s questions again about macro stuff and a bit more
Investors, for good reason, discuss the big picture of the economy and macroeconomic phenomena a lot, such as interest rate decisions and US employment figures. I enjoy reading about these myself, but I often wonder how I could utilize the macroeconomic things I follow in my own investment activities – or if an ordinary investor can even properly benefit from them. So, I started developing some questions related to the topic… for none other than Verneri.
And then a couple of other questions also came to mind, which I decided to throw at Verneri to ponder. 
1. How can an ordinary investor utilize macro data if the same information is available to everyone in near real-time across every media and channel? In other words, is following macro data a real competitive advantage for an investor or “just” mainly a basic requirement for a serious stock picker?
It’s difficult to gain a competitive advantage from macro data: everyone from hedge funds to private investors follows it, it’s not always very accurate, and the usefulness of the data depends on the interpreter. To top it all off, many people’s interpretations of the economy are colored by their own ideological views.
But it is definitely beneficial. Macro data helps in understanding the economy. Companies live within the economy. Economic growth sets the framework for earnings growth. The economy affects interest rates and inflation, which in turn directly affect stocks.
2. Should macro data be used more for stock selection or rather for assessing risks and the market environment in general? It feels like many of us “stock brothers” are looking at our portfolio’s (risk) stock picks in depression while indices are hitting All-Time Highs (ATH).
I can sympathize with that feeling.
I would say it’s more for assessing the market environment in general. But of course, if you invest in oil companies, commodities, banks, or basic industries, it is important to assess and monitor the economy. For Nordea, for example, it matters a lot where interest rates are moving and how well the economy is doing. If interest rates rise and the economy weakens at the same time, it could manifest as, for example, increased credit losses.
3. Despite the era of the giants, I ask… how can a situation be explained historically and in light of market psychology where stock indices stay flat or even fall, driven by large companies, but at the same time under the surface – somewhere among the small and mid-cap companies – a relatively broad and strong bull market is raging, and what factors enable such divergence?
It’s been a while since such a situation occurred, but the Helsinki Stock Exchange in the 2010s was characterized by a situation like that. Small companies performed much better than larger ones. But for many large companies, from Nokia to Nordea and the engineering workshops, the 2010s was a decade of setbacks and stagnation. Now the tables have turned completely. Large companies are coping well in this complex and difficult economic situation, while the growth projects of small companies have mostly gone awry and the weak momentum of the domestic economy is a burden. Companies learn, and the domestic economy is unlikely to stagnate forever.
4. You’ve mentioned that you don’t actively follow “breaking news.” What pros and cons do you see this having for your investment activities?
Or rather, I’ve tried to present this as an ideal. I do glance at the news quickly every day, but I don’t sit for hours reading news; instead, I spend more time on articles, reflections, reports, studies, etc. From Suomen Kuvalehti, I get the essential news once a week. I save my limited brain capacity for things that are essential for long-term ownership. Significant news will always reach your ears anyway.
Thanks again for the excellent and thought-provoking answers, Verneri! 
I again got a lot of new things to think about and useful perspectives on how an investor should view the macroeconomy. At the same time, the answers left a certain sense of peace and confidence that you don’t necessarily need to be able to predict everything or try to exploit it perfectly.
There is a great thought for the stock brothers in this idea from Verneri:
I save my limited brain capacity for things that are essential for long-term ownership. Significant news will always reach your ears anyway.
With these words and vibes, have a nice Friday!