An inherent element investing requires is forecasting at least some factors or events that will have a material impact on security performance. It is imperative that portfolio managers integrate market expectations analysis into their investment management process.

Leading indicators are economic variables that have been found to precede economic cycles. You are tasked with preparing a market expectations report for your client. In this report, you will analyze current economic indicators and assess their predicted impact on investment securities.

In your paper,

Construct a table that summarizes current and expected trends in economic indicators.

Provide the current data and expected long-term trend on the table for one unique economic indicator in each of the seven categories:

Overall economy

• Consumers
• Business

Government

• Central bank
• Inflation
• Market fundamentals
• For example, under overall economy the economic indicator could be GDP. However, then GDP could not be used for any other category. 
• Use at least two of the indicators from Stock-Trak (or Howthemarketworks.com) ; for all other indicators, provide the source.
• Develop an asset class impact statement for each asset class in your client’s portfolio based on current market trends.
• Explain the historical returns and variance of the asset classes in the client’s portfolio.

Use the Real (Inflation-adjusted) Returns and Standard Deviation found in Exhibit 1.1 Summary of Statistics for US Financial Market Annual Returns and Inflation, 1926–2018 from the article Historical Market Returns (Links to an external site.) to obtain comparative historical data.

• Research additional historical return and standard deviation data on any other asset classes included in your portfolio.
• Consider reviewing the interactive webpage BlackRock Return Map (Links to an external site.) for additional data on returns by asset class.
• Consider reviewing Asset Class Returns (Links to an external site.) on Portfolio Visualizer.
• Consider reviewing Asset Class Correlations (Links to an external site.) and risk on Portfolio Visualizer.

Predict changes to the asset class returns and standard deviations based on current market trends.

• Create a table to illustrate your predictions for each asset class.

Justify your predictions based on the trends in economic indicators and your asset class impact statements.