First, the impact of the business cycle and financial market conditions are assessed across major asset classes (i.e., equities, fixed-income securities such as bonds, money market assets, and currencies).
This analysis level is achieved in the light of geography, region, and country dimensions while considering leading economic fundamentals (e.g., GDP, interest rates, production, market indexes, consumer anticipations, inflation, and employment). Second, once the most interesting market place(s) is(are) selected, related sectors are classified according to their attractiveness and competitiveness.
Winning sectors are identified as industries exhibiting the best return prospects. Third, the most attractive securities are selected within the most competitive sector(s) on an individual basis (expected outperforming securities). For this purpose, issuing companies are analyzed in the light of corresponding firm-specific fundamentals.
For example, stock-based top-down investing attempts to select expected outperforming stocks in the light of issuers’ size (e.g., small caps) and related style (e.g., value or growth stocks). Finally, top-down investing allows for portfolio diversification across leading financial markets all over the world and across related winning sectors.