Capital Market Expectations and Economic Analysis

As an investment manager, you are tasked with developing capital market expectations for a portfolio that aims to achieve an average return of 7% annually over the next 10 years. You are required to assess economic indicators, interest rates, inflation, and equity market valuations to formulate investment assumptions for your company's investment strategy.

Based on the latest economic data and reports, discuss how you would analyze and project each of these factors for inclusion in your capital market expectations. Your response should also comment on any potential risks you foresee that could impact your expectations and how you would adjust your investment strategy accordingly.