U.S. nonfarm payrolls outperformed expectations; with earnings season starting up, fundamentals could be the new catalyst higher.
The first chart is of Guggenheim S&P 500 Equal Weight
As the markets return to fundamental drivers as opposed to artificial central bank injections, look for stronger earnings and economic data to push markets to new highs.
The next chart is of iShares MSCI Italy Capped Index
Italy had its sovereign debt downgraded on Tuesday due to political wrangling and weaker growth expectations. Although the downside in Europe has been capped by central bank actions, it does not mean that robust growth is around the corner.
Political crises have sprung up in Portugal, Greece and Italy this year, which greatly hinders the ability for governments to make structural changes. These structural changes are essential for European economies to correct their inefficiencies and resume the prosperity they saw at the turn of the millennium.
The last chart is of iShares MSCI BRIC ETF
As inflation indicators have fallen and commodity prices trend downward, emerging-market BRIC countries (Brazil, Russia, India, China) have seen resounding weakness.
Weakening global growth has led to a lack of natural resource demand, which serves as major revenue streams to emerging economies. This has led to continued downward revision in BRIC GDP estimates.
As long as developed countries remain tied up in political mess, their economies will be nothing more than central bank-driven. Solid corporate and economic growth are needed for a reversal in the relative downtrend seen in commodities, commodity-linked currencies and equity markets that derive much of their revenue from natural resources.
At the time of publication the author had no position in any of the stocks mentioned.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.
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