Business Cycle Impact on Asset Allocation Strategy

Imagine you are a senior portfolio manager at a wealth management firm. You have been asked to prepare a report on the implications of the current business cycle phase for asset allocation strategies. The economy is currently transitioning from a period of expansion into a potential contraction. Your report should address the following:

• Identify and explain the key indicators that signal an impending economic contraction.
• Discuss how this transition could impact various asset classes, including equities, bonds, and real estate.
• Propose adjustments to the current asset allocation strategy based on your analysis of the business cycle.

Your response should reflect your understanding of economic analysis and the relevance of the business cycle to effective portfolio management.