Good News Update: Economic Indicators, Federal Reserve Programs and CIT Group

Last Updated Jul 21, 2009 11:31 AM EDT

It's my experience that many investors can stick to their investment plans when news is good, but struggle with bad news. There's no shortage of bad news right now -- from the rising unemployment rate to the exploding federal deficit -- but there's also good news if you just look.

The Conference Board reported that the U.S. index of leading economic indicators rose 0.7 percent in June, the third straight monthly gain. This figure follows an upward revision in the May index from 1.2 percent to 1.3 percent and was also much greater than the 0.5 percent increase that was expected. This is a strong signal that a recovery is likely later this year.

Another bit of important good news is that there are signs that the credit markets are continuing to heal.

The U.S. trade gap narrowed to $26 billion in May. This was an unexpected bit of good news, as the deficit had been projected to increase to $30 billion from an initially reported $29.2 billion in April. Instead, it fell to its lowest level since November 1999. The shrinking deficit means that trade will be a significant positive for GNP growth when the second quarter GNP figures are announced. The good news is that the shrinking deficit is not solely a function of falling imports as exports rose the most since July 2008. This signifies that the global economy is also starting to stabilize.

And, of course, the stock market has reacted positively to all of this better than expected news.

It's important to keep in mind that the unemployment rate will likely continue to rise despite this good news. However, the unemployment rate is a lagging indicator -- and the stock market doesn't drive watching the rear view mirror.

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    Larry Swedroe is director of research for The BAM Alliance. He has authored or co-authored 13 books, including his most recent, Think, Act, and Invest Like Warren Buffett. His opinions and comments expressed on this site are his own and may not accurately reflect those of the firm.