Dave Yeske, DBA, CFP®
Golden Gate University
This particular chapter and its learning objectives are primarily focused on macroeconomic variables, and as such, connect primarily to three content areas: general financial planning principles (under which this topic resides), investment planning, and retirement saving and income planning. Effective investment planning requires an understanding of financial markets and the ways in which changes in gross domestic product (GDP), interest rates, and inflation rates can impact the value of investment securities. Likewise, it is important for the financial planner to understand how exchange rates impact a globally diversified portfolio. Finally, when developing retirement planning strategies, key inputs include assumptions about inflation rates, interest rates, and capital market returns. Only planners with a fundamentally sound understanding of basic economic concepts will be able to develop or evaluate appropriate assumptions for these variables.
Macroeconomic conditions encompass and influence many of the fundamental assumptions used in the financial planning process, including but not limited to interest rates, inflation rates, and capital market rates of return. An understanding of the interrelationship between economic variables allows the financial planner to better ...