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

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 Federal Reserve program to hold commercial paper holds $111 billion of the notes, down from its peak of $350 billion. The Fed's overall balance sheet was down to $2.06 trillion from the $2.3 trillion peak it hit last fall.
• The TED spread fell to just 0.32 percent, well within its normal range of 0.3 percent to 0.5 percent. This number is an indication of banks' willingness to lend to each other.
• Small-business lender CIT Group avoided bankruptcy without aid of the government. The private sector solved the problem by providing $3 billion in emergency financing. It's likely this wouldn't have been possible even a few months ago.

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.