Macroeconomic strategy
Fathom is unique in linking together economics, financial markets and geopolitics. Our views are underpinned by a comprehensive suite of proprietary data and models, not gut feelings.
Making the two-way connection between the macroeconomy and financial markets was unorthodox when Fathom first did it in 2003. But we knew it was impossible to fully understand either by looking at them in isolation. Our clients quickly found that because Fathom made this connection we delivered improved insights into the outlook for the global economy and asset markets, including investment strategy advice.
We pioneered again by adding a third element to our intelligent, independent and data-driven research: geopolitics. Geopolitical themes like the growing power of autocracies or efforts to tackle climate change, and major events that alter the status quo, like Brexit or the invasion of Ukraine, all clearly have a profound influence on the macroeconomic outlook and on asset prices. Politics drives the economy and markets and vice versa. By truly understanding all three, we are able to provide our clients with a clear and thorough outlook on the world.
For more information about our services and to discuss how Fathom can help, get in touch with Kevin Loane, Director, Macroeconomic Strategy.
Measuring transmission risk in UK financial services
Two new approaches
Fathom addressed a project on behalf of the Financial Conduct Authority, aimed at finding new ways of capturing risks to financial networks, and the way in which risk is transmitted through and potentially amplified by the network.
Our services
Macroeconomic Scenarios Service
Fathom’s Macroeconomic Scenarios Service is designed to help banks and other financial institutions operating under the IFRS 9 and CECL accounting standards to meet their regulatory obligations, and to manage risks by better understanding their exposure to different economic conditions. The Fathom service provides six short- and long-term scenarios each quarter, covering the key macroeconomic variables required for expected credit loss (ECL) calculations.
This service has two levels: Essential, which offers everything that many financial institutions will need to calculate loan loss provisions and comply with IFRS 9 and CECL regulations, and Enhanced, which is a bespoke service offering greater flexibility with the key package features, as well as additional country and variable coverage.
Global Outlook Service
Fathom’s flagship Global Outlook Service includes forecasts for major economic variables, risk scenarios and clear asset allocation advice. The Global Outlook uses fan charts to highlight the distribution and skew of risks to our central expectation.
Fathom clients who subscribe to our Global Outlook Service are individually briefed every quarter by senior Fathom staff through personal presentations, in person or online, where the content is tailored to the client’s specific needs and interests. In between we update our views and share our findings with clients through regular written research notes.
Pensions Advisory Service
Fathom’s Pensions Advisory Service responds to UK local authorities’ concerns over upcoming reforms to Local Government Pension Schemes (LGPS). This service is designed to help clients navigate the rapidly evolving landscape, providing the independent insight and advice that 87% of respondents to the government’s consultation on the ‘Fit for the Future’ reforms anticipate they will need. The service also includes training, to equip your team as they step into their new roles.
Bespoke consultancy
For many years, Fathom has provided expert consultancy services to clients in both the public and private sectors. Our clients rely on us to supply insight into complex questions, with independent and trustworthy analysis that is data-driven and includes clear policy implications. We read the literature to remain up to date with the latest research and statistical methods, and use innovative methods to produce our own proprietary data.
Our consultancy work has included:
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Assessing the impact of climate policies, and the opportunities and risks they provide to investors
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Gauging a pension scheme‘s vulnerability to macroeconomic and market developments
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Compiling detailed reports on individual sectors, e.g., the state of the UK property market
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Estimating the role and value of R&D in aerospace
The chart shows the impacts on euro area CPI from a full embargo of Russian energy by western states.
TTX Service
- Tackle the problems you face with interactive exercises
- Use cutting-edge technology and proprietary data
- Explore the trade-offs, deal with uncertainty
- Play your cards and see what happens!
Bringing analysis to life
Our table-top exercises (TTXs) are a unique and immersive way for groups to explore the risks that matter to their organisation. We design bespoke scenarios for public- and private-sector teams to move through, using cutting-edge technology and proprietary data. You act as the decision-maker, navigating uncertainty and weighing up the trade-offs, while we show you the dynamic impact of your choices in real time.
Case study
China-US AI competition: a TTX examining the geopolitical consequences of AI, depending on whether countries opt for labour-supporting or labour-replacing technology
Data, models, tools
Fathom has developed its own comprehensive range of proprietary data, models, and tools, which allow us to provide clients with reliable views on the economy and asset markets.
Global Economic and Strategic Allocation Models (GESAM)
Fathom’s GESAM, used to construct our Global Outlook, are among only a handful of commercially available macroeconomic models in the world. The models cover more than 80% of global GDP and incorporate data that stretch back 150 years. They are grounded in theory and estimated empirically. They are supported by a suite of financial tools and can be used to do scenario analysis. Combined, they offer our clients an unmatched understanding of the near-term prospects for the global economy and asset markets.
Fathom’s Integrated Risk Management model of a UK DB pension scheme (FIRM-DB)
FIRM-DB provides an integrated, internally consistent approach to thinking about the outlook for the assets and the liabilities of a UK defined benefit (DB) pension scheme. Developed over a period of more than ten years, with input from clients including pension schemes, trade bodies and regulators, the model can be used to analyse private schemes with a corporate sponsor, local authority schemes, or the DB landscape as a whole. Using the model and Fathom’s latest macroeconomic and financial market projections, Fathom staff work with scheme actuaries to assess the outlook for individual scheme funding under a range of alternative asset allocation and hedging strategies. In the past, clients have benefited from presentations around the time of their triennial valuations that outline how some alternative strategies might deliver better funding positions on average, while others can minimise the chances of severe outcomes.
Financial Vulnerability Indicator
Fathom’s Financial Vulnerability Indicator (FVI) makes a quarterly assessment of the risk of sovereign, currency and banking crises occurring in 176 countries. Beyond the headline probabilities, access to the full FVI dataset illustrates what drives potential crises, presented in a user-friendly interface. Fathom’s FVI-related services include regular updates, quarterly presentations and risk scenarios, yielding insights for asset and fund managers, analysts and strategic decision-makers.
Financial market toolkit
Fathom combines proprietary measures of the market-implied, near-term economic outlook (Fathom Leading Indicator); liquidity (Fathom Liquidity Indicator); and risk sentiment (Fathom Risk-Off Gauge). These are complemented by factor-mimicking portfolios, which are shown to deliver alpha across a range of backtests and regime types.
Geopolitical toolkit
The Fathom Political Index is a proprietary database that measures levels of democracy in more than 150 countries, and captures the rising share of autocracies in world GDP. Fathom has also produced proprietary measures of Chinese and US interaction in Africa, and will soon be comparing these with EU interaction in the same sphere.
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Case studies
Insights
Get in touch
For more information about our services or to discuss your needs and how we can help, please fill out the form below.