Managing Macro Themes In Turbulent Times

How do you invest top-down when the global economy is confusing?

Reviewed by: Dan Mika
Edited by: Dan Mika

Nicholas BohnsackInflation. The Fed. Recession fears. War in Ukraine. COVID-19 disruptions in China that reverberate across the supply chain. With so many major factors obscuring the direction of the global economy, how does a top-down manager decide what’s worth investing in? spoke with Nicholas Bohnsack, president and chief operating officer of Strategas Asset Management LLC and a co-manager of its Strategas Macro Thematic Opportunities ETF (SAMT), about the firm’s approach to high-conviction plays in uncertain times. 

The following interview has been edited for clarity and brevity. How do you select macro themes for SAMT when there are so many macroeconomic threads running through the global economy right now? 

Nicholas Bohnsack: The two elements that we really look for are, one, which [themes] have what I would describe as thematic momentum in the moment.  

There are always going to be themes that are waxing and waning, and we're trying to capture—in this idea of thematic rotation—the ones that are expressing the greatest degree of momentum and/or potential momentum looking nine, 12, 15 months down the road.  

The second element is the investability of the theme. Very oftentimes there are themes that evidence themselves, and you can even, say, take a tremendous amount of mindshare, but at the end of the day, getting a direct exposure to it is a little bit more challenging. 

Putting those two considerations together, we have found over a long period of time that we tend to have three, four or five themes that achieve the momentum component, the investability component, and that ultimately amounts to conviction on our part. What are the themes that are in SAMT right now, and why are they currently in the rotation? 

Bohnsack: If we go back to a year ago, even slightly longer than a year ago, the first one, which is still resident, is inflation for longer. And it was just this idea that a lot of the building blocks that policymakers were relying on to press this idea of transitory inflation were not things that we could agree with when we got under the hood. 

We developed a thesis around this idea that inflation would be higher, stickier for longer than the consensus and policymakers believed, and we started to think about the characteristics of that inflation with similarities and differences to the ’70s.  

Second, as we moved through the fall, I think optimism started to wane a little bit in terms of the durability of the economic cycle. Principally, for us, the ability of a fiscally driven recovery [is key] to metastasize into self-sustaining recovery under the power of organic drivers of growth. Once you lose that, you start to see growth soften.  

We looked at the landscape and felt there were still some positives in the economy, but they were not overtly “growthy.” We developed this theme of cyclical defensiveness. And it allowed us to have exposure to cyclical elements of the economy; the economy's still expanding.  

At the time, monetary policy was still broadly accommodative, but now less so. We wanted to acknowledge the fact that growth was slowing, so we pulled out some of the “growthier” components thematically and we introduced cyclical defensives.  

After that, we added quantitative tightening. The Fed, once they retired the word “transitory” in the fall, started to put their shoulder into telegraphing what normalizing policy would look like.  

It stood out to us that if they simply used the policy rate, the overnight rate, then that really impacts people who borrow short, meaning Main Street, people involved in revolving credit, small business loans, things of that ilk. Whereas the balance sheet runoff, using the balance sheet to achieve a tightening really had greater impacts for Wall Street or those that borrow long, like corporations.  

I think what the Fed has tried to telegraph is this idea that we're going to give you pretty clear guidance, Main Street. It turns out it becomes 50 basis points per meeting. There should be no surprises for you here. The chairman took 75 basis points off the table—and in our view, prospectively. Quantitative [tightening] was going to be as important an instrument, but one that may be slightly more onerous on risk assets. 

Then more recently, we had been developing this idea of cybersecurity and we couldn't solve for the thematic momentum element. So we said, clearly cyber's important. Here's the thesis. Here's how we would gain exposure to that. But why will it outperform all the other themes right now?  

Then when Russia invaded Ukraine, it became more apparent to us that cyber was a subcomponent to a broader theme of deglobalization. You've talked a little bit about Strategas making these high-conviction thematic calls. What’s the process right now, with all the uncertainty within the economy at a global level, about making a switch and going through the process of deciding which should be in its place? 

Bohnsack: The benefit of having had this consistent, although evolving, research process for as long as we have—we've been registered for 17 years—is that we're constantly looking at the macro landscape really through the lens of thematic identification. 

There are a lot of thematic crosscurrents running through the economy, and the cyber theme is perfect example of something that all of a sudden revealed itself to be a subset as opposed to a stand-alone. 

I'd say that there are really three considerations specifically. The first is that some themes just exist in a very specific point in time, for a variety of considerations. I think about a theme we had in the portfolio last year, mergers and acquisitions. 2021 just proved to be a sweet spot for M&A activity.  

That came to its natural end when there was discussion of higher taxes and more expensive money—tightened monetary conditions—and there was talk of the Justice Department looking at M&A more stringently than perhaps predecessor Justice Departments had. 

Sometimes things just come to their natural conclusion, and you have to see what's on deck. Quantitative tightening was starting to evolve and gather some momentum, so the switch was an obvious one for us.  

There are other examples I can think of, like the migration from work-from-home to economic reopening, which sort of played out in the late third quarter of 2021. It was pretty clear that the work-from-home stocks were starting to lose a little bit of that momentum while this pent-up demand to get out and about, both businesses as well as individuals, was starting to gather momentum. Sometimes there's an actual successor that evidences itself through the research. 


Contact Dan Mika at [email protected], and follow him on Twitter 

Dan Mika is a reporter for He has previously covered business for the Ames Tribune and Cedar Rapids Gazette in Iowa, and BizWest Media in Fort Collins, Colorado. Dan holds a bachelor's degree in journalism from Truman State University.