Key economic forecasts for asset allocation

<body><table border="0" cellpadding="0" cellspacing="0" width="100%"><tr><td> <font face="garamond, times new roman, times" mstheme> <p> </p> <p> </p> </font mstheme> </td></tr></table><table border="0" cellpadding="0" cellspacing="0" width="100%"><tr><td valign="top" width="1%"><font face="garamond, times new roman, times" mstheme> <p> </p> </font mstheme></td><td valign="top" width="24"></td><td valign="top"> <p>This page uses frames, but your browser doesn't support them. </p> <p><font face="Arial Narrow" size="2" color="#C0C0C0"><strong>Asset: Key Factor</strong></font></p> <p><strong><em><font face="Arial Narrow" size="2" color="#00FF00">Buy when the coloured lines trend higher, </font><font face="Arial Narrow" size="2" color="#FF0000">sell when they trend lower</font></em></strong></p> <p><font face="Arial Narrow" size="2" color="#C0C0C0"><strong>This tool is intended to show the influence on share prices of the key economic factor. For each asset class an appropriate economic time series has been chosen that best explains performance. The most suitable time series will also vary depending on the investment perspective under analysis.</strong></font></p> <p><font face="Arial Narrow" size="2" color="#C0C0C0"><strong>This tool is designed not only to show the historic relationship but also to provide a best guess as to the future trend. PIT has developed an econometric model to forecast key factors from the top-down, so as to avoid the widespread tendency for over-optimism generated by aggregating bottom-up estimates. For comparability, total return indexes have been rebased to set year-end 1994 at 100, and the key economic time series has been rebased to set 1995 at 100. </strong></font></p> <p><strong><font face="Arial Narrow" size="2" color="#C0C0C0">In each chart the stock market index is shown as </font><font face="Arial Narrow" size="2" color="#FFFFFF">the thick white line</font><font face="Arial Narrow" size="2" color="#C0C0C0"> on the right hand axis. The main explanatory variable, the historic economic time series, shown as</font><font face="Arial Narrow" size="2" color="#FFFF00"> the thin yellow line</font><font face="Arial Narrow" size="2" color="#C0C0C0">, uses the left hand axis as does the Best Guess for its future development, shown as </font><font face="Arial Narrow" size="2" color="#FF0000">the thin orange line</font><font face="Arial Narrow" size="2" color="#C0C0C0">.</font></strong></p> <p><font face="Arial Narrow" size="2" color="#C0C0C0"><strong>Both historic data and Best Guesses should be treated as general indications of trend only. Even though these are the best relationships that can be consistently applied across all markets, correlations may be poor for some styles in some regions. In other cases correlations of past performance may be good, but the modelling is subject to a high degree of uncertaintly in its ability to predict future developments.</strong></font></p> <p><font face="Arial Narrow" size="2" color="#C0C0C0"><strong>Best Guesses suggest what would happen to future performance for each asset class based on the PIT econometric model, tested over 15-25 years of historic data, which utilises consensus estimates for GDP, interest rates, wages and prices.  </strong></font></p> <hr color="#FF0000"> <p align="center"><font size="2">[ <a href="global_asset_allocation_sitemap.htm" target="_top">Site Map</a> ] [ <a href="index.htm" target="_top">Home</a> ] </font><font size="2" face="Arial"><br> </font><font size="2">[ <a href="Chart_Library.htm" target="_top">Chart Library</a> ] [ <a href="ChartLibrary_investing_style.htm" target="_top">Style Charts</a> ]</font> </td></tr></table><table border="0" cellpadding="0" cellspacing="0" width="100%"><tr><td><font face="garamond, times new roman, times" mstheme> <p align="left"><font face="Arial Narrow" size="1" color="#C0C0C0">Copyright © 1999 Professional Investment Tools Ltd., authorised by the Financial Services Authority. An Independent Financial Adviser. Please read Financial Health Warning and Licence Agreement. UK laws apply exclusively. Principal sources: Consensus Economics, Corel Corp., FIBV, Global Financial Data, PIT, national governments and stock exchanges. Information and opinions are based on sources believed to be reliable and accurate. However PIT does not guarantee this to be the case, and does not accept liability for any loss arising. This is for information only and does not constitute a solicitation to deal in any securities. Opinions are liable to change. Past performance is no guarantee of future success. Last modified: August 22, 2002</font><font face="Arial Narrow" size="2" color="#C0C0C0"><strong>.</strong></font></p> </font mstheme></td></tr></table></body>