Formulating Capital Market Expectations

As a newly appointed portfolio manager, you are tasked with developing capital market expectations based on current economic indicators. You note that inflation is currently at a low rate, and interest rate expectations are stable. Additionally, the unemployment rate is diminishing, and the GDP growth rate has shown signs of improvement.

Considering these economic conditions, discuss how you would formulate your capital market expectations for equity and fixed-income markets over the next three to five years. Address the implications of interest rates, inflation, and economic growth on your expectations.