Assessing Forecasting Tools for Economic Analysis in Portfolio Management

XYZ Wealth Management is evaluating potential investment opportunities for its clients in the face of an uncertain economic environment. The firm typically employs a variety of forecasting tools to aid in investment decision-making. The firm's economists have identified the following key macroeconomic indicators: GDP growth rate, unemployment rates, inflation rates, and consumer confidence indices.

Recently, they received reports indicating a potential economic downturn. The firm's chief economist believes that utilizing advanced forecasting models, particularly econometric models and leading indicators, will be vital in predicting market movements and client needs.

In this context, develop a comprehensive essay that outlines the significance of forecasting tools in economic analysis for portfolio management. Discuss the advantages and disadvantages of using econometric models versus leading indicators. Additionally, provide recommendations on which tools could be most beneficial for XYZ Wealth Management in the current economic climate. Support your recommendations with appropriate examples and rationale.