September 2026    |  Steve Dunne for “Ceteris Paribus” |

Yes, I am. Though probably not in the sense you are thinking.

I am an economist — through and through — and have been since 1970. I majored in economics at a university known for turning out world-class economists, and I hold a Ph.D. in the subject with two major fields: monetary theory and policy, and international economics. My brainwaves are soaked in macroeconomics: the big picture, the analysis, and the synthesis of an insatiable quantity of data. My daily life consists of steeping in data, watching trends, and puzzling over the relationship between the two. I live and breathe the stuff.

So let us segue to our topic. In the world of financial forecasting there are two great schools of thought: fundamental analysis and technical analysis. I belong to the first. I would like to explain why, and, along the way, to have a little fun at the expense of the second.

What a Fundamentalist Does

A fundamental analyst asks one deceptively simple question about any investment: what is this thing actually worth? Not what it sold for yesterday, not what the crowd is whispering about it, but what it is worth — the way you would size up a rental house or a dry-cleaning business before making a purchase.

To answer that, we look at the business itself: its sales, its profits, its debts, the cash it throws off, the quality of its management, and the strength of its competitors. Then we widen the lens. What is the economy doing? Are interest rates rising or falling? Is the dollar strong or weak? Is inflation waking up or going back to sleep? Is the Federal Reserve the investor’s friend this year or its stern parent? Every one of these things flows, eventually, into the earnings of companies and from there into the prices of their shares. A fundamentalist believes that, over time, price follows value the way a dog on a long leash follows its owner. The dog runs ahead, lags behind, sniffs at every hydrant — but if you want to know where the dog will end up, watch the owner.

This is an old and honorable tradition. Its founding idea, written down in the 1930s and never improved upon, is that a stock is worth the cash it will eventually pay you, discounted for the waiting. The most famous investors of the last century built their fortunes on nothing more exotic than that. It is also — not coincidentally — the tradition of economics. Fundamental analysis is simply economics applied to a single company, then to an industry, then to the whole economy, and finally to the price on your statement.

What a Technician Does

A technical analyst asks a very different question: what has the price been doing lately, and what shape does it make on a chart? The technician does not much care what the company makes, whether it earns money, or whether the Fed is about to raise rates. All of that, the technician says, is “already in the price.” What matters is the pattern: the trend line, the moving average, the “support” and “resistance” levels, the volume bars, and a bestiary of chart formations with names that sound like a cocktail menu at a nautical-themed bar — the Head and Shoulders, the Cup and Handle, the Double Top, the Rising Wedge, the Dead Cat Bounce, and, I am not making this up, the Abandoned Baby.

The premise is that history repeats, that crowds behave in recognizable rhythms, and that those rhythms leave footprints on the chart that a trained eye can read. It is, in short, the study of the shadow rather than the thing casting it.

Why I Am Not a Technician (A Partial List)

First, it is astrology with a ruler. The astrologer looks at the pattern of the stars and tells you what will happen to your love life. The technician looks at the pattern of the squiggles and tells you what will happen to your retirement. Both are very confident. Both are dressed nicely. Both have a vocabulary that makes the customer feel they are in the presence of a science. And both, when they turn out to be wrong, explain that the chart (or the star) was “giving a false signal.” A signal that is false whenever it fails and true whenever it succeeds is not a signal. It is a horoscope.

Second, the patterns are in your head, not in the market. Human beings are magnificent pattern-finders. It is how our ancestors spotted the leopard in the tall grass, and it is also why we see faces in clouds and the Virgin Mary on toast. Give a person a chart of coin flips — pure randomness — and he will find trends, support levels, and at least one Head and Shoulders. A well-known finance professor once proved the point by having his students generate a “stock chart” by flipping coins, then showing it to a chartist, who pronounced it a strong buy. The stock, of course, did not exist.

Third, the evidence is unkind. Economists have been testing chart-reading since the 1930s, when one of them examined thousands of published market forecasts and concluded, politely, that it was doubtful the forecasters could forecast. Study after study since then has found that once you count trading costs — and technicians trade a great deal, because the chart is always saying something — the average technical strategy earns about what a buy-and-hold index fund earns, minus commissions, minus taxes, minus sleep. There is a reason the technical analyst’s yacht is so often described in the future tense.

Fourth, it is circular. Technicians will tell you that “support at $50” matters because so many other technicians are watching $50. Perhaps so. But an investment thesis whose entire foundation is “other people who think like me are also looking at this line” is not analysis; it is a group chat. A famous economist once compared this to a newspaper beauty contest in which the prize goes not to the reader who picks the prettiest face, but to the reader who best guesses which face the other readers will pick — and so everyone spends their energy guessing the guesses of the guessers. He did not intend it as a recommendation.

Fifth — and this is the economist talking — it answers the wrong question. Suppose the chart is right and the stock is “breaking out.” Breaking out toward what? Without some notion of what the company is worth, you have no way of knowing whether the breakout is the start of something or the last gasp before the fall. The fundamentalist may be early; the fundamentalist may be wrong about the timing; but the fundamentalist at least knows what he is standing on. The technician is standing on the previous squiggle.

A Word in Fairness (Very Briefly)

I promised bias, and I have delivered it, but honesty requires two concessions. Prices do exhibit some “momentum” over periods of a few months — the academic researchers have documented it, and it is a real puzzle for those who believe markets are perfectly efficient. Technical tools can be useful for the mundane business of when to buy something you have already decided, on fundamental grounds, that you want to own. A chart is a fine speedometer. It is a terrible map.

What This Means for You

If you are a client of a financial planner, you are not trying to outguess the market on Tuesday. You are trying to own good assets, at sensible prices, for a long time, and to survive the bad years without doing anything foolish. That is fundamentalism, and it is the only approach I know that rewards patience rather than punishing it. It is slow. It is unglamorous. It will never produce a chart pattern called the Abandoned Baby. But it is, as the economists say, ceteris paribus — all other things being equal — the way the money is actually made.

So yes: I am a fundamentalist. I read balance sheets rather than tea leaves, I watch the Fed rather than the Fibonacci, and when someone shows me a Head and Shoulders, I recommend a good shampoo.

Standing Sources Consulted

The judgments in this paper are informed by publications I read regularly and to which I subscribe:

The Economist The New York Times The Washington Post Bloomberg Businessweek Bloomberg — Odd Lots Financial Advisor Magazine First Trust Data Watch

First Trust Market Commentary J.P. Morgan Asset Management Capital Ideas / Capital Group Infrastructure Capital Substack CFP: Knowledge for Practice The American Economic Review Econometrica