In order to emphasize core concepts, I have intentionally oversimplified the discussion thus far to cover only four basic asset classes. The fact that the economic biases of these four asset classes are relatively straightforward to analyze has also helped clarify the main ideas. In the end, understanding the cause-effect relationship between shifts in the economic environment and asset class returns is the most critical lesson to draw from this discussion. The specific asset classes used, their historical and prospective returns, and whether a particular moment is a good time for the strategy are far less important factors. This is because it is the concepts that survive through time and can be relied upon looking ahead.
Using the cause-effect relationships that have been introduced in previous chapters, we now turn to a similar analysis of other asset classes. The first step when considering other asset classes, as you might suspect, is to determine their bias to shifts in economic growth and inflation. As a reminder and guide in this initial process, Table 8.1 provides a summary of the economic biases of each of the four asset classes covered up to now. More importantly, the reasoning behind each bias is included. You need to possess a strong grasp of the rationale in order to effectively apply the same logic to new asset classes.