NEW YORK (CNN/Money) - Buoyed by the belief that the economy and earnings are both on the road back to health, U.S. stocks are putting on their best performance since 1999. But outside of the equity arena, such a cheery assessment is hard to come by.
Over the past three weeks, as the S&P 500 rallied 7.1 percent, the 10-year Treasury note has also risen. This shows that bond investors are casting a jaundiced eye on the rally in stocks, expecting instead the sort of low-growth environment that keeps the Fed on hold (and profits down) for some time to come.
At the same time, the dollar has drooped, dropping 3.4 percent against the United States' major trading partners' currencies. This may be a signal that global investors no longer see U.S. growth prospects as particularly good, and are shifting their cash elsewhere.
Then there is the matter of the economic data. They've been lousy. Weekly jobless claims have consistently come in higher than expected and Friday the Labor Department said the unemployment rate rose to 6 percent in April. Despite continued discounting by the auto companies, April car sales fell. The Institute of Supply Management's monthly read on the manufacturing economy showed continued contraction. And so on.
The optimists' reply to why stocks are rising in the face of all this is that investors are "looking across the valley," focused not on lousy current conditions, but on improvement that will come tomorrow. Since stock investors are putting their money into individual companies ("it's a market of stocks, not a stock market"), the rise in share prices suggests a collective assessment that business really is going to improve.
It's not exactly a new argument. People have made it several times over the past three years -- really every time the market has shown signs of life -- and so far they've always been wrong.
But there is some reason for hope that the stock market's assessment of the future may be correct and the economy will improve. The reason for the improvement? The stock market itself.
CEO's are intensely aware of their companies' stock prices, keeping track of each day's move. As employees of the shareholders, they are ultimately paid on the basis of their ability to get that stock price higher -- the better the stock's performance, the better they're doing their job, it seems, and the freer hand they have in pushing through new projects, expansion plans and acquisitions.
Since it is, more than anything, Corporate America's lack of confidence that is holding the economy back, the rise in stocks could be a very good thing.
-- Justin Lahart is a senior writer at CNN/Money covering markets and investing.
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