Market & Economy
How does Affinity gain investment perspective?
We do so in a few, relatively simple ways. While simple, this data provides a fairly comprehensive and sophisticated view. While these tools help provide us with perspective, there are other more detailed analysis that we perform as well.
- the use of price-based statistics (indicators) to gauge the likely direction of on investment, etc.
- this is Affinity’s main tool in making investment decisions
- moving averages, such as the 200-day, are a simple example of technical indicators
- for a more detailed description of this, see ITEM 8 of our ADV II
Morningstar’s Market Fair Value - Graph
- is the stock market under (below 1) or overvalued (above 1)?
- provides guidance in when to be cautious (well above 1) and optimistic (well below 1)
- at extremes – it is helpful in identifying potential for a turn in the market
- provides historical context – the graph’s data goes back years
Yardeni Research – YRI S&P 500 Earnings Forecast (page 5)
- provides annual S&P 500 (large US stocks) target levels for the current & two following years
- helpful in developing expectations for short to intermediate-term return potential
- classic valuation model based on projected earnings & the level of interest rates
American Institute for Economic Research – (AIER) Leading Economic Indicators Index
- measures the likelihood of economic expansion or contraction
- economic expansion
- more likely when the level is above 50
- stock markets tend to do well when this is the case
- economic contraction
- more likely when the level is below 50
- stocks markets tend to do badly when this is the case