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A fundamental indicator based on the key economic relationship that most closely explains the performance of each style or sector.

Visitor: Technical analysis is certainly helpful, but it takes fundamentals to convince me.

RouteMaster: Sorry, if we failed to make that clear. In fact another of the chart types in the Styles RouteMap is about fundamentals - economics. This chart type shows a fair Value Line of where share 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 light green) and Best Guesses are orange (and pink), 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.