By Deborah Weir.
Headlines scream global unrest and hint at war. The stock market is weak and confidence indicators are poor. Don’t they know that war, as terrible as it is, stimulates the economy?
Look at the graphs of GDP during wartime from chapter 19 in Timing the Market.
No one wants war; but investors are misinterpreting the economic effects of war.
2) One of the most successful banks in the U.S. is the Federal Reserve. The securities that it bought during the financial crisis, among other investments, are paying off.
The Fed paid an estimated $77.7 billion to the Treasury Department last year according to a news release on its website http://www.federalreserve.gov/newsevents/press/other/20140110a.htm
While this payment is less than that in 2012, the Fed has transferred funds to the Treasury every year since 1934.
3) Good news from the banks could boost the equities market.
That foundation of the banking system, commercial and industrial loans, increased at an annualized rate of 26.4% last February according to a Federal Reserve report.
Most of the data has improved – including real estate loans on line 11. Banks seem to be responding to increased business activity.
