In economic market, for leading indicators, we look at shipping, stock market. . We also look at money
supply, interest rates and inflation. For instance, when we look at inflation increasing in the future, we
would reduce our bond holding , and this means leading indicators help with asset allocation .
In the industry sector, we would look at business cycles, structural factors , industry life cycle and the
When looking at characteristics of industry, we look at price to book value, P/E ratio etc.
Note that cyclical changes are temporary cycles while structural changes are more long term and
permanent in nature.
At the lower economic cycle: trough, interest rates are lower, when people can borrow cheaply and
invest in consumer durable goods and stcks…
As the economy improves, investment in capital goods excel . But when it peaks, the interest rates are
really high and people tend to reduce borrowings . However , consumer staples excel because these are