Understanding Key Economic Relationships in our Portfolio Management

At WSG, we closely monitor several key economic indicators to inform our Proactive Risk Optimization (PRO) strategy in portfolio management. Understanding these relationships is crucial in making informed decisions that align with our goal of being a leader in wealth management.

GDP and Unemployment Rate (Okun’s Law):

GDP is a crucial economic scorecard, indicating how well an economy is performing. Generally, a high GDP correlates with lower unemployment rates as businesses thrive and hire more workers. However, this relationship can vary due to factors like technological advancements, which can lead to GDP growth without a corresponding decrease in unemployment. In our PRO strategy, we consider these nuances, recognizing that GDP growth doesn’t always equate to lower unemployment, impacting consumer spending and investment trends.

Consumer Price Index (CPI) and Interest Rates:

The CPI measures inflation through a basket of common goods and services. Central banks adjust interest rates in response to inflation expectations. When crafting our PRO strategy, we analyze these trends, understanding that rising interest rates can cool down an overheated economy, while lower rates can stimulate spending and borrowing. These dynamics significantly influence market conditions and investment opportunities.

Consumer Confidence Index (CCI) and Retail Sales:

Consumer confidence directly impacts retail sales, with higher confidence boosting spending. However, this relationship is also influenced by factors like employment rates and wage growth. In our PRO strategy, we consider these additional elements to anticipate retail trends, recognizing that consumer confidence is a complex indicator influenced by various economic factors.

Housing Market Indicators and GDP:

Housing market activities like construction and sales significantly impact GDP. The housing market also affects consumer spending through the wealth effect. In our PRO strategy, we monitor these indicators, understanding that changes in the housing market can have broad implications for economic growth and consumer behavior.

Stock Market Performance and Consumer Confidence:

While the stock market can influence consumer confidence, this relationship is not always direct. Stock market trends, influenced by factors like speculative bubbles or international events, can impact economic sentiment. Our PRO strategy incorporates this understanding, recognizing the stock market’s role in shaping consumer and business confidence.

Interest Rates and Stock Market Performance:

Interest rates significantly influence stock market performance. Low rates encourage investment in stocks, while high rates make savings more attractive. Our PRO strategy involves analyzing sector-specific reactions to interest rate changes, understanding that different sectors have varying sensitivities to these shifts.

Yield Curve and Economic Outlook:

The yield curve, especially when inverted, is a potential indicator of a recession. However, it’s not infallible. Our PRO strategy considers the yield curve in conjunction with other indicators, recognizing that it’s one piece of a larger economic puzzle.


The interplay of these economic relationships provides a comprehensive view of the market dynamics. In our PRO strategy at WSG, we integrate this understanding in hopes to optimize risk and capitalize on investment opportunities. Recognizing that these relationships are not fixed but influenced by a range of factors – from government policies to global events – we stay agile and informed, aiming to ensure our strategies remain robust and competitive in the world of wealth management.  Our commitment to proactive risk optimization enables us to adapt to changing economic conditions, aiming to grow your portfolio.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.

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