What is the foundation of fundamental forecasting?

The foundation of fundamental forecasting lies in analyzing economic indicators that affect the overall economic environment and consequently influence asset prices. Economic strength, inflation, and interest rates are key components in this analysis.

Economic strength refers to the health of an economy, often measured by GDP growth, employment rates, and consumer spending. A strong economy typically leads to higher asset prices as businesses perform well and consumer confidence rises. Inflation is important because it represents the rate at which prices for goods and services rise, influencing purchasing power and overall economic stability. Lastly, interest rates impact borrowing costs, consumer spending, and investment decisions. Lower interest rates generally stimulate economic activity, while higher rates can slow it down.

Together, these factors provide a comprehensive view of the economic landscape and help analysts predict future market movements based on how these indicators might evolve. Understanding these economic fundamentals is crucial for making informed investment decisions, as they directly tie into the underlying value of assets in the markets.