This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Global Macro: Fundamentals Driving Markets Higher

NEW YORK ( TheStreet) -- Markets have been digesting some better-than-expected news lately, which has propelled prices near yearly highs.

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 (RSP) over SPDR S&P 500 Price (SPY). As markets have rebounded since the Federal Reserve hinted at winding down easing earlier this year, market breadth has similarly rebounded.

Alcoa (AA) announced after markets closed on Monday it projects stronger growth for the remainder of 2013. This bodes well for materials stocks as well as cyclical sectors tied to economic growth.

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 (EWI) over iShares S&P Europe 350 Index (IEV). This measures the relative strength of Italian equities versus a broader European equity 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 (BKF) over Vanguard Total World Stock Index ETF (VT).

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.

Andrew Sachais' focus is on analyzing markets with global macro-based strategies. Sachais is a chief investment strategist and portfolio manager at the start-up fund, Satch Kapital Investments. The fund uses ETF's traded on the U.S. stock market to gain exposure to both domestic and foreign assets. His strategy takes into consideration global equity, commodity, currency and debt markets. Sachais is a senior at Georgetown University earning a degree in Economics.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
AAPL $123.25 0.00%
FB $83.30 0.00%
GOOG $548.34 0.00%
TSLA $185.00 0.00%
YHOO $45.10 0.00%


DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs