Just in time for remembrances of Scrooge, the market has been faced by a deluge of good news in recent days. A better jobs report, lower unemployment, some positive reports from other countries, and a budget deal to avoid another shutdown have all been in the headlines. Of course, all that good news heats up taper talk and drives markets ……………………………south. Can the market take all this good news? That is the question of the day.

So far, we have had one day when the market accepted good news for the economy as good news for the markets. The other days we have seen markets fall in response to good news. I am not naïve and get that cheap money has played a part in driving up stock prices this year. However, taper talk should only affect speculators and not investors and, frankly, should not move the market too much anyway. The truths of this market are pretty simple:

  1. With or without tapering, interest rates will stay low for the next two years.
  2. An improving economy will be good for corporate earnings.
  3. The risk adjusted return on investment on equities will likely be attractive compared to other choices that investors have.

So, we may have to flush out speculators from the market due to tapering, but…..at the end of the day….good news for Main Street will be good news for Wall Street.

By Ted Schwartz, CFP©