What does fundamental analysis primarily focus on?

Fundamental analysis primarily focuses on the economic indicators and market conditions, making it the correct choice. This analytical approach seeks to determine a security's intrinsic value by examining various fundamental factors such as a company’s financial health, earnings, revenue, industry conditions, and macroeconomic factors. Analysts look at elements such as GDP growth, interest rates, inflation, employment data, and overall market performance to assess how these factors might impact a company's future profitability and stock price.

By understanding both the broader economic landscape and specific company metrics, fundamental analysis aims to identify undervalued or overvalued stocks and inform investment decisions. This method contrasts with technical analysis, which would focus more on historical price movements, trading volumes, and market sentiment, but fundamental analysis is rooted in understanding what drives the value of a security beyond just price trends.