Top down approach:
Economic analysis: global / macroeconomic factors, we’re looking at asset allocation and global
allocation. We would overweight or underweight classes of assets based on economic phenomena like
inflation, which would lower the price for bonds. Eg. Fiscal policy, monetary policy, inflation etc.
Industries: if inflation is coming down , we would look at financial industries, if inflation is going up, we
would look at consumer and resources industries which would transfer the inflation effect onto the
You could use economic data to look at what would happen… for instance, for valuation of stocks, we are
looking at the future cash flows and predicting what the value of the stock should be at present.
Statistic Canada does not release any information, but MLI supplies such composite indicators
Housing market is a good indicator: if it’s good, means job market is good, people feel secure and are
ready to spend. If the housing market is tanking, then that kills consumer spending and marketing. It’s
not usually housing sale, but building permits that matter . Again inflation, money supply are important
indicators as well.
Even work week is important- over time means that there are increased demands for goods and services.
Difference between a corporate rate and Government rates
- Understand that the rates are made up of RRFR, inflation and Risk premium., where RRFR and
inflation makes NRFR ( T bill) . So the private sector rates include risk premium unlike the