What is it worth: fundamental analysis#
The long-term owner’s lens. You’re not buying a ticker, you’re buying a share of a business, which means the job is working out what the business is worth and comparing that to what it costs today.
Two halves.
The numbers, from the three financial statements — income statement, balance sheet, cash flow statement. What does it earn, what does it owe, and how well does it reinvest?
The things that don’t appear in numbers. Brand strength. Whether management is competent and honest. Whether there’s a genuine competitive advantage that others can’t copy. Whether the industry is growing or dying. A company can post a soft quarter and still hold a trusted brand, an enormous content library and global reach — those don’t show up in this quarter’s earnings and they’re most of the value.
The limits are real. Qualitative judgement is subjective. Everything rests on projections that may be wrong. And the numbers themselves can lie — Enron’s fundamentals looked sound right up until the company didn’t exist. Buffett’s rule handles most of this: never invest in a business you can’t understand.
Where is the price going: technical analysis#
Charts rather than reports. Price, volume, and the patterns they form. Volume matters more than beginners think — it’s the energy behind a move, and a breakout on thin volume usually isn’t one.
The vocabulary is small: an uptrend makes higher highs and shallower falls; support is the floor where buyers reliably step in; resistance is the ceiling where sellers take profits; a breakout is price clearing either; a fakeout is a breakout that snaps back and traps whoever chased it.
It’s genuinely easy to learn, which is both the appeal and the problem.
Here’s where I’d complicate the usual dismissal, because the evidence is more interesting than either camp admits. Park and Irwin’s review of 92 modern studies found 58 reporting positive results for technical trading strategies, 24 negative, 10 mixed. That’s not nothing, and anyone telling you it’s straightforwardly astrology is overstating.
But the same review is blunt about why that tally is weaker than it looks: data snooping, rules selected after the fact, and shaky estimation of transaction costs. Test enough patterns against enough history and some will work by chance. And profitability tended to show up in currency and futures markets, more than in stocks, and largely in periods running up to the early 1990s — before the strategies were widely known and cheaply executable.
The fair summary: the patterns describe crowd behaviour that’s sometimes real, the edge is smaller than advertised, and transaction costs eat much of what’s left. It tells you what price is doing and never why.
What is the economy doing: macro analysis#
The widest lens, and the right one for index funds and ETFs where individual company detail is irrelevant by construction.
Monetary policy dominates. Central banks move interest rates, and rates reprice everything — cheap borrowing lets companies expand, and low yields on safe assets push money toward stocks. The current US target range sits at 3.50–3.75% as of the July 2026 meeting.
Fiscal policy — government spending and taxation — gives shorter-lived pushes and drags.
The indicators worth watching: GDP, unemployment, consumer confidence, manufacturing activity. All free on any economic calendar.
Geopolitics, because wars, tariffs and elections move markets on expectation long before they change any actual earnings.
The blind spot is the obvious one: macro tells you nothing about whether a specific company is any good.
Picking your lens#
Match the tool to what you actually hold:
- Own individual companies for years? Fundamental. The others are noise at that horizon.
- Entering and exiting positions over weeks? Technical, with clear eyes about the edge and the costs.
- Hold broad index funds? Macro, mostly to understand why your portfolio is doing what it’s doing — not to trade on it.
And the honest version of “combine them”: they cover each other’s blind spots, but combining lenses is not the same as having a strategy. Someone who checks fundamentals, then charts, then the Fed, and buys when any of the three looks encouraging hasn’t triangulated — they’ve built a machine for justifying whatever they wanted to do. Decide in advance which lens governs the decision and which ones can only veto it.
The failure mode all three exist to prevent is the one at the start: buying because someone confident on the internet said it was going up.
So what to actually do#
- Write down your holding period. It picks the lens for you.
- For any individual company you own, read one annual report — the three statements, then the moat.
- If you use charts, log your trades including costs. The evidence says costs are where the edge goes.
- For index holdings, follow rates and leave everything else alone.
- Pick your governing lens before you look, so the analysis can’t become a search for permission.
Sources & further reading#
- The Profitability of Technical Analysis: A Review — Cheol-Ho Park & Scott H. Irwin — the 92-study tally (58 positive, 24 negative, 10 mixed) and the methodological caveats that qualify it.
- What do we know about the profitability of technical analysis? — University of Illinois — the fuller working paper, including which markets and eras the results come from.
- Federal Reserve FOMC statement, June 2026 — the current target range for the federal funds rate.
