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A fundamental indicator based on the key economic relationship that most closely explains the performance of each alternative asset class.

Visitor: Do you have anything that where I can see all that really matters in one place?

RouteMaster: Yes. Summary Tables. These list our current Action Recommendations for all the markets in this RouteMap, together with the recommendations for them on the basis of each type of strategy alone, namely Valuation, Trends and Investor Sentiment. There is a whole set of Tables so you can drill down to ever greater levels of detail within each type of strategy down to the individual strategies of which there are seven for this asset class. We will get back to this later.

However in terms of charts, this one is the closest to showing what matters most in one place. It shows a fair Value Line of where asset prices should be if they responded fully to key economic developments, as explained by our own econometric models. Divergences between actual prices and Fair Value show the extent of investor euphoria or fear.

These models can also project trends five years into the future. These are fed by consensus forecasts of key economic variables. While such forecasts can be wrong and all models of necessity over-simplify, we don't actually need a high degree of accuracy - the right direction and order of magnitude will do for our purposes.

Incidentally have you spotted our colour coding – indexes are white, variables are yellow and Best Guesses are orange, while buy & sell signals are red arrows.

This strategy is very robust because it represents a consistent way of explaining markets ranging over half a century, including the forecasts. This means that it can take into account both economic booms and recessions, strong and weak currencies as well as rising and falling inflation and all phases of the generational cycle.  

As you can see, the outlook is good, if indeed the economists forecasts turn out to be even approximately accurate.