Visitor: There is more to valuing shares than long-term bond yields. Where do profits come in?

RouteMaster: Indeed. We have another type of chart that combines the two. This rearranges the PE formula to calculate Fair Value for shares by taking into account inflation and and long-term bond yields, while also cyclically-adjusting EPS.

It doesn't matter if you don't fully grasp the mechanics. Investors RouteMap is built so you can easily understand the conclusion in a chart. In this case it is that these two indicators explain the stock market's behaviour remarkably well over a very long time, and suggest that shares are far too cheap at the time when this sample chart was originally published.

Incidentally have you spotted our colour coding – indexes are white, variables are yellow (and light green) and Best Guesses are orange (and pink), while buy & sell signals are red arrows.