Many investors are always asking what will be the next catalyst for the stock market and what could drive weekly or even daily trading action in the market. For one day, one week, or even a few weeks; a single event that raises the confidence of investors or consumers can drive the stock market higher, but in the end it will always have to be the fundamentals that get things to turn around for long haul.

So many times throughout this economic downturn and horrible stock market action we have heard strategists on television giving a “compelling” reason that stocks have hit the bottom. Thus far all of there reasons have struck out. Why have they consistently struck out with their calls of a bottom in the market? Simply because the fundamentals of the economy and the stock market aren’t yet showing any signs of recovery, in fact they are getting worse and worse.

What exactly are the most basic fundamentals of the economy? Our economy is a consumer driven economy so the most important fundamentals are consumer spending (retail sales), gross domestic product, trust in the overall economy, and employment numbers. The United States GDP is extremely reliant on the consumer, as personal consumption accounts for over 70% of GDP. The basics of the stock market are similar, but slightly different. The fundamentals of the stock market are things such as: corporate profits, trust in the system, amount of uncertainty in the system, and simple supply and demand and the willingness of investors to take on some risks.

The bottom line is in the end you should invest based on how the fundamentals of the economy and the stock market will do. A certain event may change how the market reacts for a limited amount of time, but in the end the fundamentals will always be the train that drives the market and the economy either higher or lower.