François Trahan knows numbers: Raised in Canada, the son of a father with a mathematics Ph.D. and a mother who was an accountant, math came easily to him. Trahan studied economics and econometrics at the University of Montreal and immersed himself in the mysteries of the business cycle at BCA Research in Montreal before heading to New York. This year Cornerstone Macro’s Trahan, 47, enters the All-America Research Team Hall of Fame after winning No. 1 in Portfolio Strategy for ten of the past 11 years. (He has also appeared on the team for Quantitative Strategy.) Despite his success, Trahan now recognizes the limitations of trying to quantify economic and market processes. “If I could have done it again, I would have wanted to know more about history and psychology — behavioral finance,” he says. “If you think about it, in every asset bubble the world has ever seen, the commonality is human beings and how people react to greed and irrationality. It’s not just numbers.”
With his rimless glasses and quietly precise speech, which has just a hint of a Canadian accent, Trahan appears the epitome of the peerlessly rational man. But his career has been shaped by experience, serendipity, hard work and, he says, the efforts of many colleagues. BCA was a formative step. “The reality is that academia is not really geared toward the understanding of macro as it pertains to financial markets, so BCA was an awesome experience,” he says. “I had three bosses while I worked there; two of them are clients of mine at Cornerstone, and the third heads the Bank of Canada — the Janet Yellen of Canada, Stephen Poloz.”
For Trahan, New York meant deep immersion in the markets. He spent four years at Bear Stearns Cos. as chief investment strategist — he made his first appearance on the research team in 2004, while at Bear — and left in early 2007, before the firm collapsed in the subprime mortgage crisis. He jumped to International Strategy & Investment Group (ISI), a research shop run by Ed Hyman, an All-America Research Team Hall of Famer who was No. 1 in Economics for 35 consecutive years, to serve as an investment strategist for what he calls the best macro team on Wall Street. In 2010 he left to partner with former Bear colleague Edward Wolfe at Wolfe Research (then Wolfe Trahan & Co.), and in 2013 he co-founded Cornerstone Macro with Nancy Lazar (who in 2015 broke Hyman’s first-team streak), Andy Laperriere and Roberto Perli.
By then Trahan had begun to think more seriously about the end of the Great Moderation — that 40-year period defined by relatively moderate booms and busts. As the investment world struggled to negotiate the volatility and disruption of the postcrisis years, Trahan increasingly began to write and talk about a new era in which many of the old rules, reinforced by the Great Moderation, no longer applied. In 2011 he wrote, with Katherine Krantz, The Era of Uncertainty: Global Investment Strategies for Inflation, Deflation, and the Middle Ground. “The end of the Great Moderation led to an era of boom and bust,” Trahan said in a 2014 interview. “It will completely change the investment process. Everything you’ve learned about investing is going to fail.” In a recent e-mail to Institutional Investor, he declares, “The past is no longer the best blueprint for the future.”
Trahan is no permabear. Though he did warn about housing problems before the subprime crisis, some of his most famous calls were to stay invested, and even now he’s asserting that the stock market will do fine through the end of 2016.
Throughout his career Trahan has managed to work with some of the greatest minds in that broad view of the markets and the economy known as macro. In particular, he praises the collegial atmosphere that existed at ISI when he first went there. Later, he admits, the firm grew larger and shifted its focus from macro to fundamental analysis — one factor in his departure. ISI merged with Evercore in 2014, but the old ISI remains Trahan’s touchstone for the ideal high-level research firm. “I think 29 of our 52 employees at Cornerstone spent part of their careers at ISI,” he says. “Essentially, we have created something like the ISI of old.” As Cornerstone’s managing partner, Trahan acknowledges that day-to-day management takes time and effort, but he’s quick to credit his team for allowing him to manage and continue his winning research ways. “So far, so good,” he says.
The All-America Research Team Hall of Fame Listed below are the members of the All-America Research Team Hall of Fame, ranked by the total number of times they finished in first place in their sector(s), and the firms where they worked at the time of their most recent top appearances.
Ed Hyman,
Evercore ISI 36 Dennis Leibowitz,
Donaldson, Lufkin & Jenrette Securities Corp. 25 Stephen Girsky,
Morgan Stanley 23 Jerome Gitt,
Merrill Lynch 22 Michael Armellino,
Goldman, Sachs & Co. 21 Joel Price
Donaldson, Lufkin & Jenrette Securities Corp. 20 Jack Salzman,
Goldman, Sachs & Co. 20 Joseph Ellis,
Goldman, Sachs & Co. 19 Mark Schoenebaum,
Evercore ISI 18 Richard Sherlund,
Goldman Sachs & Co. 17 George Staphos,
Bank of America Merrill Lynch 17 William Young,
Donaldson, Lufkin & Jenrette Securities Corp. 17 Robert Farrell,
Merrill Lynch, Pierce, Fenner & Smith 16 Patricia McConnell,
Bear, Stearns & Co. 16 David Raso,
Evercore ISI 16 Kenneth Abramowitz,
Bernstein 15 Robert Cornell,
Lehman Brothers 15 Emanuel Goldman,
Paine Webber 15 A.M. (Toni) Sacconaghi,
Bernstein 15 Meredith Adler,
Barclays 14 Jessica Reif Cohen,
Merrill Lynch 14 Ehud Gelblum,
Morgan Stanley 14 Thomas Hanley,
UBS Securities 14 Jerry Labowitz,
Merrill Lynch 14 Andrew Lazar,
Barclays 14 Lee Seidler,
Bear, Stearns & Co. 14 Andrew Steinerman,
J.P. Morgan 14 Steven Fleishman,
Wolfe Research 13 Barry Good,
Morgan Stanley 13 Jeffrey Klein,
Kidder, Peabody & Co. 13 Michael Weinstein,
J.P. Morgan 13 David Adelman,
Morgan Stanley 12 Harvey Heinbach,
Merrill Lynch 12 John Hindelong,
Credit Suisse
First Boston 12 Curt Launer,
Credit Suisse
First Boston 12 Steven Milunovich,
Merrill Lynch 12 John Tumazos,
Prudential Equity Group 12 Gary Yablon,
Credit Suisse
First Boston 12 Ivy Zelman,
Zelman & Associates 12 Joseph Bellace,
Merrill Lynch 11 Jeffrey deGraaf,
Renaissance Macro Research 11 Elaine Garzarelli,
Lehman Brothers 11 Jonathan Goldfarb,
Merrill Lynch, Pierce, Fenner & Smith 11 Joseph Greff,
J.P. Morgan 11 B. Alexander Henderson,
Citigroup/Salomon
Smith Barney 11 Jay Meltzer,
Goldman, Sachs & Co. 11 John Rohs,
Schroder Wertheim & Co. 11 Jeffrey Sprague,
Citi 11 Cai von Rumohr,
Cowen and Co. 11 Richard Bernstein,
Merrill Lynch 10 Ernest Liu,
Goldman, Sachs & Co. 10 John Mackin,
Morgan Stanley 10 J. Kendrick Noble Jr.,
Paine Webber
Mitchell Hutchins 10 Katharine Plourde,
Donaldson, Lufkin & Jenrette Securities Corp. 10 William Siedenburg,
Smith Barney, Harris Upham & Co. 10 François Trahan,
Cornerstone Macro 10 Harold Vogel,
Merrill Lynch 10
