Stockholm (HedgeNordic) – If macro markets are efficient at discounting consensus views then, in theory, only economic surprises should move markets. But active managers cannot realistically hope to “out-forecast the market at every stage of the cycle”, according to GAM’s Michael Biggs, who helps manage the JB Local Emerging Bond Fund. However, he finds “the market is prone to making specific forecast errors in a systematic way” particularly in terms of how credit data is interpreted. Biggs views the market consensus and IMF mind-set as being that credit growth must be good for economic growth, and vice versa. But this conflates two conceptually different variables: the stock of credit and the flow of growth. Biggs argues that flows should be compared with flows, and on this basis the second derivative is what counts. Whether credit growth is positive or negative matters far less than whether it is accelerating or decelerating, Biggs contends. Hence, when he worked as an economist on the sell side at Deutsche Bank, Biggs coined the term “Credit Impulse”, defined as the change in the rate of credit growth. The indicator has been the subject of some collaborative academic and central bank research papers, for instance with St Anthony’s College at Oxford University and the Central Bank of the Netherlands.