Abstract
M.Comm.
The objectives of the study are to explore the different macro and micro forecasting
techniques used in determining the stage of the economic cycle which will ultimately
assist in deriving the stage of the investment cycle. Following on the top-down analysis,
is the analysis of the impact of the interest rate cycle and its influence on asset classes
through the evolution of the investment cycle as the impact of the interest rate cycle
holds different investment consequences for equities, bonds and cash.
Different investment styles are also analyzed in order to highlight the changing dynamics
of fund management. The value and growth investment styles are analyzed in
conjunction with momentum and size investing. Hedge funds were excluded for the
purposes of this study.
Stock market valuation and liquidity influence markets differently during the course of the
business cycle although they do ultimately filter through in the tactical asset allocation
process.
Deriving the investment cycle through its different stages is the final step in the
investment analysis process prior to the formulation of an investment strategy. The
dynamic interaction between the mentioned macro and micro variables result in different
tactical asset allocation strategies by different fund managers which ultimately determine
their success as fund managers. Being cognisant of the interaction between the asset
classes during the different stages of the investment cycle will assist in maximizing
investment returns for a given level of risk.