So you've taken Macroeconomics 101 and did pretty good in the course but chances are that you're like most people and thought; when am I ever going to use this stuff?  In general that a pretty good response until you shift your focus and realize that understanding the simplest of trends can lead to some great profit opportunities whether the news is good or bad.

Econ Refresher In 3 Sentences

Macroeconomics is the study of the economy as a whole.  It looks at the broader trends and challenges facing society, and governments against the backdrop for the competing demands for our scarce resources, like raw materials, time, and technology.  Macroeconomics looks at broad issues such as inflation, taxation, unemployment, recessions, inequality, deficits and debt.

So How Does This Pay For The Class?

Now that you're refreshed you need to have your ears and your eyes at attention to apply the basics of macroeconomics to the making money.  This is done in an extremely simple two step process but does require you to have some investment capital to take advantage.  This is a case of taking money to make money, but it should be pretty easy money.  The two step process is:

Step 1  Listen to the news:  Read the news. Be one with the news.  Pay attention for any business news relating to the overall health of the economy.  Things like unemployment reports, oil inventories, housing starts, inflation rates and recession talks.  When things sound positive chances are the stock market will react positively.  When the news sounds bad the stock markets will generally move negatively.  You should take a macro approach to the macroeconomic news and apply a good/bad rating on the overall sentiment of the news.  Once you have that, it's on to step 2.

Step 2 Buy or Sell the Market: With your market up or market down opinion in hand it's time to take action on the stock market.  Today's stock market has a plethora of offerings for you to buy but we're going to be focusing on Exchange Traded Funds (ETFs) that buy an entire index (S&P 500).  There are two types that are available; long and short.  

If we have a downward opinion on the macroeconomic news we will buy a short index ETF.  These short ETFs are designed so that when the stock market goes down these short ETFs actually go in the opposite direction meaning you're making money when the market goes down.  All the signs of a market pointing upwards means that you should move to a long index ETF so that your investment goes up alongside the market.

The important thing to keep in mind when you're buying these ETFs is to always keep a close eye on the macroeconomic trends because as they shift you may need to sell your position in the short index and buy the long to go with your change in market opinion.  Although this method is not foolproof, and no method truly is, it is a great way to see how real everyday news is moving the markets and how more often than not you can actually make money