Evaluating Economic Conditions Using Forecasting Tools

A boutique investment firm has recently engaged your services as a portfolio manager. The firm seeks to update its investment strategies in light of changing macroeconomic conditions. Your initial directive is to evaluate the current economic environment using advanced forecasting tools.

Detail the primary forecasting tools you would utilize, and explain how you would apply these tools to derive a nuanced economic outlook for the firm. Illustrate your answer with examples, and discuss the potential impacts of your forecasts on asset allocation and investment strategy decisions.

Additionally, consider the limitations of these forecasting tools and how these limitations might affect your recommendations.