The analyst comparing the expected performance of indices to general asset classes, such as equities, bonds, and alternatives to identify which class of assets will be expected to under- or out-perform is considered part of a macro-analysis top-down method of forecasting.

In a bottom-up forecast, the analyst first takes a microeconomic perspective by focusing on the fundamentals of individual firms. The analyst starts the bottom-up analysis by looking at an individual firm’s product or service development relative to the rest of the industry. The analyst should assess the firm’s management and its willingness and ability to adopt the technology necessary to grow or even maintain its standing in the industry. Given the analyst’s expectations for the firm, the analyst uses some form of cash flow analysis to determine the firm’s investment potential (i.e., expected return).