The job of an economist is not necessarily the most glamorous, but people in this role play an extremely important function in the world of finance. Company finances don’t operate in a vacuum. They are impacted by the economy in many ways. A simple example is the “jobs report.” Many companies wait for the jobs report because they sell products to consumers. If their customers are out of work, it will affect sales. The economic reports contain all kinds of important information about every aspect of the economy. Economists must make sense of that data using models they’ve developed.
Economists like Christian Broda work for financial services firms because they have a unique ability to make sense of economic data. This means they can produce reports that their clients find extremely useful. Investors have millions (or even billions) of dollars at stake and are always looking for every edge they can get. Broda, who served as an Associate Professor of Economics at Chicago Booth, is uniquely qualified to crunch the numbers based on his many years of experience and his education.
Economic data has long served as a central data point for investors in the stock market or in private equity deals. It’s a foolish idea to attempt to ignore what’s going on in the broad economy. If there’s a general slowdown, it will affect sales and profits. If things are humming along, it makes sense to forecast more aggressively. Forecasting could not be done without economic models. Large funds are no so enormous in size with the funds they manage that they can easily afford to keep an economist (or a team of them) on staff.
Economists pay attention to the Consumer Price Index because it tells them whether inflation is becoming a problem or not. If it is, they may pull back on their predictions a bit. As people have less money to spend, they’ll cut back on any items they deem to be luxuries. This could easily impact a fund that holds numerous luxury retailer stocks. Likewise, the Consumer Confidence Index indicates how people are feeling about the economy. If they’re feeling fearful, they’ll spend less. This affects even lower-cost, everyday items. A fund that holds many consumer goods company stocks would be very concerned about a lowering in this index. That’s the reason they have economists on staff who are reading the reports every day and making sense about the direction they’re heading in. If they can get the jump on a new trend, they’ll be able to make very astute investments. Every investment company needs a perceived edge. Without one they’ll be paralysed by inaction. Having a team of economists helps them get the advantage over their rivals.