Forecasting Economic Indicators for Investment Decisions

As a portfolio manager, you are tasked with evaluating economic indicators to forecast market conditions. You consider which forecasting tools to utilize to make informed investment decisions for your clients. Each tool has its advantages and limitations.

Your initial evaluation includes three methods: leading economic indicators, lagging indicators, and coincident indicators. As you weigh these options, it’s critical to determine which forecasting tool holds the greatest predictive power for turning points in the business cycle.