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Our valuation model computes a "Fair Value" for the US Stock Market (S&P 500) based on expected earnings, earnings growth, and interest rates.  More specifically, we compare the yield on a 10-year US Treasury Note to the projected operational earnings (and earnings growth) of the companies comprising the S&P 500 -- compared to the price of the S&P 500.  

Historically, our Valuation Model can help to tell us when the stock market is undervalued (or a good buy) or overvalued (expensive).  One difficulty is that markets often go to extremes of valuation.  That is, it is difficult to predict HOW overvalued or undervalued a market will become.  This is one reason why we use fundamental methods (such as our Valuation Model) in combination with technical models (quantitative methods based on price action).

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